What Is a Fixed Rate Mortgage?

A mortgage whose interest rate does not change for the life of the loan. Your payments also do not change for the life of your loan (principal and interest). Taxes and insurance can vary.

Types of Fixed Rate Mortgages:

• 15-year - A loan with a term of 15 years. Although the monthly payment on a 15-year mortgage is higher than that of a 30-year mortgage, the amount of interest paid over the life of the loan is substantially less.

• 30-year - A loan with a term of 30 years.

Advantages of using Fixed Rate Mortgages:

• Predictable - The major advantage of a fixed rate mortgage is that it presents a predictable housing costs for the life of the loan. A fixed rate mortgage guarantees that your interest rate stays the same, which means that your monthly principle and interest payments through the entire term of the mortgage remain unchanged. With a fixed rate mortgage, your monthly payments would only increase due to increases in property taxes or insurance rates.

• Budgetable - A fixed rate mortgage allows you to budget accurately and enjoy lasting peace of mind. Knowing that your mortgage payment will remain the same month after month allows you to plan for lifes other pleasures, like vacations, college educations and retirement. It's pretty simple, if you don't like risk, then a fixed rate mortgage is right for you.

• Unaffected by interest changes - Housing cost remains unaffected by interest rate changes and inflation.

The Gofer Broker

In the soft market, clients are asking Realtors to perform menial, sometimes humiliating tasks. June Fletcher on scooping, painting, vacuuming and drawing the line.

Jonathan Marks makes his living as a real-estate agent. Lately, he's been babysitting rats.

With the housing market in a dive and homes lingering unsold for months, the relationship between real-estate agents and their clients is beginning to change. Both buyers and sellers are demanding more from their brokers, and getting it.

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How should you choose your mortgage?

Fixed or ARM? 30 year or 15 year? (excerpt from http://www.ginniemae.gov)

You’re right - there are many types of mortgages, and the more you know about them before you start, the better. Most people use a fixed-rate mortgage. In a fixed-rate mortgage, your interest rate stays the same for the term of the mortgage, which normally is 30 years. The advantage of a fixed-rate mortgage is that you always know exactly how much your mortgage payment will be, and you can plan for it.

Another kind of mortgage is an Adjustable Rate Mortgage (ARM). With this kind of mortgage, your interest rate and monthly payments usually start lower than a fixed-rate mortgage. But your rate and payment can change either up or down, as often as once or twice a year. The adjustment is tied to a financial index, such as the U.S. Treasury Securities index. The advantage of an ARM is that you may be able to afford a more expensive home because your initial interest rate will be lower.

There are several government mortgage programs that might interest you too. Most people have heard of FHA mortgages. FHA doesn’t actually make loans. Instead, it insures loans so that if buyers default for some reason, the lenders will get their money. This encourages lenders to give mortgages to people who might not otherwise qualify for a loan.

Fixed-Rate Mortgage

A Fixed-Rate Mortgage applies the same interest rate toward monthly loan payments for the life of the loan. Fixed-rate mortgages are more straightforward and easier to understand than Adjustable Rate Mortgages (ARMs), are more secure for the buyer, and are popular with first-time homebuyers. Since the risk to the lender is higher, fixed-rate mortgages generally have higher interest rates than ARMs.

For example, a lender can offer a 30-year fixed loan to a homebuyer at a 7.0% interest rate. The loan is locked in to the 7.0% interest rate, even if the market interest rate rises to 9.0%. Conversely, if the market interest rate decreases to 5.5%, the borrower will continue to pay the 7% interest rate.

Fixed-Rate benefits include:

• No change in monthly principal and interest payments regardless of fluctuations in interest rates
• More stability may give you "peace-of-mind"

Fixed-Rate considerations include:

• Higher initial monthly payments compared to those of adjustable rate mortgages
• Less flexibility

Adjustable Rate Mortgage

An Adjustable Rate Mortgage (ARM) does not apply the same interest rate toward monthly payments for the life of the loan. Throughout the life of that loan, the homebuyer's principal and interest payment will adjust periodically based on fluctuations in the interest rate.

For example, a lender could offer a 30-year ARM loan to a homebuyer at an initial 6.5% interest rate. During an adjustment period for the ARM loan, the market interest rate could rise to 8.0%, resulting in a significantly larger interest payment. Similarly, the market interest rate could decrease to 6.0%, resulting in lower interest payments.

ARM benefits include:

• Initial payments lower due to lower beginning interest rate, usually about 2 percentage points below the fixed rate
• Ability to qualify for a higher loan amount due to lower initial interest rates
• Lower interest payments if the interest rate drops over time
• Interest rate caps limit the maximum interest payment allowed for the loan

ARM considerations include:

• Initial lower interest rate and monthly payments are temporary and apply to the first adjustment period. Typically, the interest rate will rise after the initial adjustment period.
• Higher interest payments if the interest rate rises over time

30-Year vs. 15-Year Mortgage Terms

Typically, a 30-year mortgage term will have lower monthly payments than a 15-year mortgage term. If you decide on a 15-year loan, you will pay significantly less in total interest over the life of the loan, but your monthly mortgage payments will be higher. As a homebuyer, you will need to consider the implications of supporting higher monthly payments when accepting a 15-year term. Can you consistently meet those monthly payments over time? Look at the table below.

	Advantages	Considerations
15-Year	Lower Overall Mortgage Cost	Higher Monthly Payment
	Builds Equity Faster	Must Qualify for Higher Monthly Payment
	You have Debt for Only 15 Years	You have Less Cash for Other Expenses
	Lower Interest Rate	Less Money goes toward Tax Deductions
30-Year	Lower Monthly Payment	Higher Overall Mortgage Cost
	Qualifying is Easier	You Pay More in Overall Interest
	You have More Cash for Other Expenses	You have Debt for 30 Years
	More Money goes toward Tax Deductions	Higher Interest Rate

Mortgage Applications Surge

WASHINGTON (AP) -- Mortgage application volume increased 3.8 percent during the week ending Oct. 26, according to the Mortgage Bankers Association's weekly application survey.

The MBA's application index increased to 681.7 from 656.5 the previous week.

Growth in applications was driven by rising refinance volume. Refinance application volume increased 9.2 percent, while purchase volume dropped 0.7 percent. Refinance volume accounted for 49.6 percent of all applications, compared with 47 percent the previous week.

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Best Growth in 1 1/2 Years

WASHINGTON (AP) -- The economy picked up speed in the summer, growing at a brisk 3.9 percent pace, the fastest in 1 1/2 years and an impressive performance even as a credit crunch plunged the housing market deeper into turmoil.

The latest snapshot of the country's economic health, released by the Commerce Department on Wednesday, suggested that the economy is demonstrating much resilience and thus far holding up well to the strains in the housing and credit markets, which had intensified during the third quarter and rocked Wall Street.

Individuals ratcheted up their spending. U.S. businesses sold more goods abroad and boosted some investment at home. Those were some of the main factors helping to push up overall economic activity in the July-to-September quarter.

The third quarter's growth rate was up slightly from a 3.8 percent pace logged in the second quarter. It marked the strongest showing since the first quarter of last year.

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The Vultures Are Circling

Call them grave dancers, vulture funds, turnaround specialists or the more euphemistic "opportunity investors." However you identify them, the deal is the same: When hyperactive real estate markets lose their sizzle, or property owners no longer can afford to hang on to their houses, well-capitalized investors smell blood and move in.

That's happening in most of the "bubble" areas of the country that saw heavy speculative activity and razzle-dazzle financing from 2001 through 2005. But it's also happening in less volatile markets where unaffordable mortgages and economic distress are producing record numbers of panic sales to investors at fractions of former values.

Housing Bust Takes Big Toll on Realtors

STERLING HEIGHTS -- Thousands of Michigan real estate agents -- some with decades of experience -- are getting squeezed out of the business, casualties of one of the worst housing slumps in state history.

Agents who prospered a few years ago, when consumers' appetite for real estate seemed insatiable, now are struggling or switching careers.

Michigan agents say a lack of home buyers for the glut of houses on the market is driving them from the business. Those who do manage to move a property are realizing lower commissions as a result of dampened real estate prices.

In the last year alone, the Michigan Association of Realtors has lost 10 percent of its membership, or about 3,500 agents. Membership now stands at about 30,000, the trade group said. An untold number of agents have taken second jobs to weather the slump or have put their licenses in "escrow," basically not using them until the market turns around.

Metro Detroit has been among the regions worst hit by the housing slowdown, which started in Michigan in late 2005 and hit the rest of the nation early this year. In September, Realtors sold 3,703 homes in Metro Detroit, down from 4,184 in September last year and 4,456 the year before that, according to multiple listing service Realcomp II Ltd.

Real estate agents across the country are leaving the business as the sales downturn worsens. The National Association of Realtors is predicting a 4 percent decline in its membership by the end of 2007, from a record high of 1.4 million members at the beginning of this year.

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Focus Shifts to how Clients Live

Real-estate agents once specialized in representing homes in particular neighborhoods.

But increasingly those who specialize are sidestepping the map and building businesses structured around their clients' lifestyles or demographic traits.

Want to buy or sell a "green" home? Look for an "EcoBroker," an agent trained to understand energy-efficient, environmentally sensitive construction and how to navigate a buyer through the market for homes featuring green traits.

Interested in downsizing or finding a home for the golden years? Seek out a senior real-estate specialist — there are roughly 100 in Washington state — who helps clients over 55.

Want to flaunt your success? Get a luxury-home specialist.

Want to run away? Dial up a resort and second-home property specialist (RSPS).

Fretting about having to get your home set up correctly to sell? Seek out an agent certified in staging.

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You Want to Know Why You Feel Like You are Struggling Financially?

Because the U.S. Dollar Has Just Been Devalued
by a Third Over the Past Five Years.

And more devaluation is coming. Perhaps another 50 percent. The markets are convinced that the Fed is going to drop rates again on Halloween by another half percentage point. This means hyperinflation, and all markets moved accordingly Friday. The Dollar hit a new low, at 77.00, and is worth 53 percent of what a Euro is worth. This is a massive currency devaluation right before our eyes. It means the cost of everything is going up, which the Master Planners figure will diminish the debt load as debt contracts are expressed in Dollars from the past that were worth more than they are now. Those debts can be paid back in the future with dollars that are worth less. But this thinking requires folks to get their hands on a greater quantity of these devauled dollars. This thinking is ludicrous, but reality.

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