What To Make of The Headlines

The past month has been packed with Headlines which will be written about in the history books. Here are some of the headlines:

Debt Ceiling Deal Reached To Avert Default: The Huffington Post recapped the news that congress had passed a deal to raise our debt limit. This is like your credit card company increasing your credit limit allowing you to go deeper in debt. But at least you can meet your short term needs. This also included a plan to reduce spending by $2 Trillion...depending on who you ask. Apparently the S&P missed their estimates by about $2 Trillion. But haven't we all misplaced a trillion dollars here or there?

News of the debt ceiling was quickly replaced by news that S&P had downgraded the US credit rating for the first time in history. This is big news because the rate at which the US borrows money could increase. Ever have a credit card company increase your rate because you made a late payment on a different account?

What does all of this mean? In the short term all of the added uneasiness has lead to a rash of investors retreating to mortgage bonds, as investments, lowering long term mortgage rates. Here is a graph showing the improvement in mortgage bonds. These bonds work inversely to mortgage rates. So, as the graph increases, mortgage rates decrease.


It's certainly an understatement to say that mortgage rates are great right now. What's more important is that your purchasing power is greater than it has ever been. You know the stories our parent's tell of 18% mortgages, well the payment on a $100,000 loan at 18% is $1,507.09, while the payment on the same size loan at 4% is $477.42. What does this mean? Buying power at today's interest rates is approximately three times greater than it was in the early eighties. And you don't have to put up with the brown and yellow painted cabinets, shag carpet that requires raking, or faux wood wall paneling in your basement that they were opting for back then.

So, don't let the news or the headlines prevent you from making a great investment on a home for your family. It is still possible to get financing with zero down payment, and there is help for those with past credit challenges.

Contact kristi@mcarthurhomes.com for information on available homes, check out www.mcarthurhomes.com for neighborhoods where McArthur is building, or go to www.scottutah.com for more information on financing your new home.

Why Forbes Magazine says NOW is the Time to Buy

Forbes Magazine recently published an article outlining 9 reasons that now may be the best time ever to buy a new home. We all see signs of the economy improving, but it's always great to hear good news from a reliable source like Forbes. Check out their reasons-to-buy which include:

• Interest Rates at a 50-Year Low
• Rates Expected to Increase
• Low Down Payment Mortgages Available
• Lowest Home Prices in Years

Read the full article by Forbes Magazine HERE.
Then check out a McArthur Homes new home community near you!

The Low Down on Credit Scores

Credit scores can be confusing and frustrating. The good news is that once you understand how to build your credit, your credit score can be your best friend. Check out the table below to see how building good credit can save you thousands of dollars on your new home.  I've also posted some information on how your credit is calculated. Thanks to Nitro Credit for all the helpful info. They are experts at credit repair!

Want to learn even more about building your credit? Join McArthur Homes and Nitro Credit for a FREE Credit Repair Seminar on November 6th at 10:00am. Located at the Thanksgiving Meadows Clubhouse, 3790 N. Bluegrass Blvd, Lehi Utah. For more information email jesse@mcarthurhomes.com




Our lives revolve around credit and FICO scores but sadly some people never realize it until it is too late. The chart below shows how much more someone with a lower credit score would pay over the term of a 30-year conventional mortgage loan for $200,000.
(5/2009)

Credit Score	Interest Rate	Cost of Your Credit
720-850	4.75%	$0.00
700-719	5.125%	$16,668.00
640-699	5.67%	$41,392.80
600-639	6.5%	$79,506.00

Your credit score is calculated based on credit-related information contained in your credit file. This information is analyzed in five different ways to produce a three-digit FICO score.

1. Payment History:
    35% of your score is based on paying your credit related accounts. Late payments and other negative marks drop your score quickly.
2. Credit Utilization:
    30% of your score is based on how much credit you have and how are you using it. If you are close to utilizing the maximum amount of credit limit provided you, this can reflect negatively on your score.
3. Length of Credit History:
    15% of your score is based on good payment history over a period of time.
4. New Credit Inquiries:
    10% of your score is based on the number of inquires coming from creditors.
5. Types of Credit:
    10% of your score is based on having different types of credit accounts such as home mortgage, vehicle, credit cards, etc.

Why all the Buzz about Interest Rates?

So if you haven't heard everyone talking about LOW INTEREST RATES, you may be living in a cave. Interest rates are down as low as 4.375%. Compared to average rates of 7% that is a huge savings and compared to the 18% interest rates that my parents got on their first home in the 80s it seems downright unbelievable!

But what does that really mean to you? Interest rates can seem kind of obscure and not totally relevant to your bottom line. Here are some hard numbers to show you just how big a deal this really is:

$119,531 ... That's the amount of money you could save on a $200,000 loan over the life of the loan with a 4.375% Interest Rate vs. the historical average of 7%. (A bigger loan amount would mean even bigger savings.)

$14,232 ... That's the additional yearly income you would need to qualify for the SAME LOAN with 7% interest rates instead of today's low 4.375%.

$332.03 ... That's the bottom line savings in your monthly payment with a 4.375% rate vs. a 7% rate on a $200,000 loan.

So if you're waiting for the "perfect time" to purchase your new home, THINK ABOUT THIS: Buying now means you can get MORE HOUSE FOR LESS MONEY per month and you will SAVE MONEY ON EVERY MONTH OF EVERY YEAR on your payments until you pay off your home loan. Is there a $14K raise in your near future? Do you have an extra $120,000 that you'd like to throw away on interest payments? If not, now may be the perfect time for you to invest in a new home.


Thanks to Pierre Alley, McArthur Homes' preferred lender for his help in putting together this information. Click here to find out more about Pierre and financing your new home.

Here's all the math for you detail oriented people:
Parameters: $250,000 purchase price, Loan Amount: $200,000 or 20% down
Conventional, 30 year fixed rate
Rate of 4.375%, APR = 4.526%, P&I payment = $998.57, Total over 30 years = $359,485
Approximate monthly income need to qualify = $4278 (based on a conservative 28% ratio) or $51,335 or borrower needs to make $24.68 per hour
Same loan parameters
Rate of 7.00%, APR = 7.177%, P&I payment = $1330.60, Total over 30 years = $479,016
Approximate income needed to qualify = $5464 or $65,568 or borrower needs to make $31.52 per hour.

Saving with the lower rate = $332.03 per month or $199,531 over the term
Additional monthly income needed to qualify at the higher rate = $1186
All number based OAC.  

Interest Rates as Low as 4.375%

Interest rates as low as 4.375% have been announced by several of McArthur Homes' preferred lenders, but will they stay this low for long? Here's what Pierre Alley had to say about current interest rates:

Okay, so everyone was holding their breath anticipating where LeBron James would end up playing basketball. This topic has been discussed for months. But, the more important question for all of us is have we seen the bottom for interest rates? My guess is YES. The week started out with the European Banks showing a stronger position. French Finance Minister Christine Lagarde stated that after “stress” tests, European Banks are “solid and healthy. You may recall after the U.S. Banks went through their tests, the positive results helped boost stocks nearly 40%. A jump in our stock prices will most likely cause bond prices to fall. Claims for unemployment benefits were lower this week as well. Bonds have been priced for perfection and so any misstep in economic news provides a good reason to take out profits, which we have seen the last couple of days. I believe bonds have been overbought and so there could be a dark cloud hovering in the near future. This morning an executive board member on the European Central Bank stated, “the worst of the sovereign debt crisis seems to be over.” The jury is still out as Italy might be the next country to reveal debt problems. But for now enjoy these historic low interest rates.




Pierre Alley

Utah Mortgage

Work: 801-561-4700 Fax: 801-561-8585 Cell: 706-9763

Pierre@utahmortgageloan.net / www.utahmortgageloan.net

Housing- A Great Investment

One of McArthur Homes' preferred lenders, Dan Davidson, recently shared this chart with me. It clearly shows that despite a slower housing market over the last few years, purchasing a home is still a great long term investment. In fact, home values are up 46% since 2000! Add to that lower interest rates and a Federal tax credit and you can see that now is an incredible time to take a look at purchasing a new home! For more information, visit www.mcarthurhomes.com.

The Scoop on Interest Rates

With so many changes in interest rates, goverment and the economy lately, I sought out some information on what is really going on with mortgage rates. Here is the scoop from Scott Smith of Flagstar Bank:

"As many of you know, mortgage rates have improved significantly over the past 45 days. We saw extreme volatility in rates during the fourth quarter of 2008, where 30 year fixed rates ranged from 5.75% to nearly 7% within a short period of time. Thankfully they are now in the 5% range, largely due to actions by Ben Bernanke and the Federal Reserve.

On December 30 the Fed announced that they would invest nearly $500 Billion dollars between January and June of 2009 to purchase Mortgage Backed Securities from Fannie Mae, Freddie Mac, and Ginnie Mae. Banks and mortgage companies issue loans to home owners, they then pool multiple loans together, securitize them, and resell these Mortgage Backed Securites (MBS) as investments that most of us own through our 401k's and other investment accounts. The demand and purchase of these MBS dictate what home loan rates are. So the Fed's commitment to purchase these MBS has is a direct way for the government to lower mortgage rates and make housing more affordable and stimulate further selling of new and existing homes."

Feel free to call Scott if you have any questions about interest rates, what's going on with the Fed, how to qualify for a loan, or anything else that is mortgage related.

Scott Smith
Loan Officer

Office: (801) 676-5531
Cell: (801) 209-3850
Scott.Smith@flagstar.com