Year Closes With Rates Down

Mortgage rates in mid-December neared lows for the year. Freddie Mac, for example, said 30- year fixed-rate financing was available at 6.03 percent plus .6 points. This level is near the 5.98 percent bottom seen in October and more than 1 percent below the rate from a year ago.

One-year Treasury-indexed adjustable-rate mortgages (ARMs) averaged 4.07 percent with .6 points, This is the lowest level seen since 1984 when Freddie Mac began tracking such statistics.

Fixed-rate loans remain attractive because they allow borrowers to lock-in today's rates for 30 years. ARM rates can rise or fall and thus represent more risk for borrowers.

Help The Economy, Refinance

It used to be that refinancing a home was something of a rarity, but no longer: With rates reaching long-time lows, many homeowners have quickly financed, refinanced, and refinanced again. Such refinancing has meant lower monthly costs for a given mortgage amount as well as substantial help for the national economy.

In the past two years, according to the Homeownership Alliance, fixed mortgage rates have fallen to a 40-year low of nearly 6 percent and rates on adjustable mortgages (ARMs) have fallen to a record low of just over 4 percent. As a result, says Mark Zandi, chief economist with Economy.com, millions of homeowners have cut mortgage interest-rate bills by more than $274 billion.

Given so much refinancing can the trend continue? According to Alan Greenspan, chairman of the Federal Reserve, "applications for refinancing, while off their peaks, remain high. Moreover, simply processing the backlog of earlier applications will take some time, and this factor alone suggests continued significant refinancing originations and cash-outs into the early months of 2003."

Conventional Loan Sizes Increase

Starting January 1st, the amount you can borrow for owner-occupied homes with conventional financing will increase by at least $22,000. Loans above the conventional loan limit -- so-called "jumbo" mortgages -- typically require a somewhat higher interest rate, so the new and bigger conventional loan limits mean that borrowers can larger loans without the jumbo penalty.

According to Freddie Mac, the 2003 conventional loan limits for owner-occupied homes look like this:

• $322,700 for mortgages on one-unit properties (up from $300,700);

• $413,100 for mortgages on two-unit properties (up from $384,900);

• $499,300 for mortgages on three-unit properties (up from $465,200); and

• $620,500 for mortgages on four-unit properties (up from $578,150).

Meanwhile, basic FHA 203(b) loan limits for owner-occupied homes have also increased. Be sure to speak to your broker for the latest information regarding your community because maximum FHA loan limits do not apply in all communities. Figures from the Mortgage Bankers Association of America show the following FHA 203(b) ranges for 2003:

• Single-Unit -- $154,896 to $280,749

• Two-Unit -- $198,288 to $359,397

• Three-Unit -- $239,664 to $434,391

• Four-Unit -- $297,840 to $539,835

Re-Evaluating Your Credit

The start of each year is a good time to review your credit standing. Is your credit debt up, down, or too much? Do you have too many credit cards and is somebody making purchases in your name?

For instance, it was recently found that a single group of computer-savvy crooks had broken into 30,000 consumer credit card accounts, the largest case of identity theft to date. Given millions of accounts and billions of monthly transactions, it follows that more cases are likely to be out there.

What to do? Review your bills monthly and look for unusual purchases, especially charges from unusual locations and stores. Also, check your report with one or more of the three major credit reporting agencies -- Equifax, Experian, and TransUnion.

Be sure to visit http://www.ftc.gov/os/statutes/2summary.htm -- that's the Federal Trade Commission web page which explains your rights to credit information. Also, remember that under certain circumstances you may be able to obtain a free credit report. For additional information, speak with your broker or lender.

How Homes Are Changing

While cars may be associated with annual models, that's not the case with homes. Yet the fact is that over time the profile of the average house has changed. According to the National Association of Home Builders, between 1987 and 2001 homes have become:

• Bigger -- It's not an illusion, homes are getting larger. The average size of a new home has gone from 1,905 sq. ft. to 2,324 sq. ft.

• More Comfortable -- 86 percent of new homes now come with central air conditioning, up from 71 percent.

• More Car Oriented -- Eleven percent of all new homes built in 2001 had no garage or carport -- down from 18 percent in 1987.

• Less Traditional -- In 2001, 58 percent of all new homes had one or more fireplaces, down from 62 percent in 1987.

What Is Title Insurance -- And Why Do You Need It?

Each time a home is sold, financed or refinanced it's likely that title insurance will be required. In general terms, you and your lender want to know that you have good, marketable and insurable title. You want to know because it's your property and lenders want to know because your property is security for the loan -- if you can't pay the mortgage the property will be sold and the proceeds of the sale will be used to re-pay the lender.

There will be a title search to assure that the chain of ownership is good and that the party selling to you really owns the property. But what if the official records are wrong? What if a past owner was a bigamist or insane? Now it becomes possible for claims against the current owner to arise.

In exchange for a one-time fee paid at closing, title insurance protects against most claims by paying legal fees, damages, and losses. However, there can be policy exceptions and in Iowa owners typically rely on an insurance fund operated by the state. (See: Chapter 16, Section 91)

For details regarding coverage and costs, speak with your settlement provider. Ask if a "re-issue" rate is available -- you may be able to get a significant discount when replacing an earlier policy within several years.

For more articles by Peter G. Miller, please press here.