On Tuesday the 16Th the Federal Reserve cut the Federal Funds rate to a range of 0-.25%. Fed Chief Ben Bernanke is clearly concerned about  the deteriorating economy. The labor market has deteriorated ans spending and production have declined.

Often people think that because the Fed has cut interest rates that it is going to bring mortgage rates down as well. It is not how that works.  The Federal Funds rate in laymen terms is the interest rate that banks charge for funds borrowed from other depository institutions overnight. The Federal Funds  rate is how the Fed helps regulate the supply of money in the U.S. economy.

Interest rates, specifically mortgage rates are derived from several sources. For one fixed rate mortgages are tied to the 10 year treasury bond as well as the trading of mortgage backed securities on the open market. The Federal Funds rate has no direct baring on mortgage rates.

For those of you who have home equity lines of credit or (HELOC’s) potentially could see a drop in your rate as those rates are tied to the Prime rate. Some credit cards are also tied to the Prime rate so you could see a drop in those rates as well.

-The most important excerpt from the recent Fed meeting is the announcement from the Fed that they could expand on their already announced program to buy debt and mortgage backed securities from Fannie Mae and Freddie Mac. It also confirmed they are looking at buying long term Treasury bonds. Both these two combinations could very well help bring interest rates down even lower. Which means if you are looking to purchase or refinance in the near future you very well could be looking at a substantially lower interest rate!

Applying for and shopping mortgage rates in CT is a click away www.EversleyCapital.com

Is often misunderstood by the consumer or borrower. So to help you understand what exactly it is we are going to break it down in a very simple format.

What is PMI? It is added insurance that most lenders require if you have less than 20% equity in your home. Simply put, if you are purchasing a home and putting down less than 20% as a down payment, let’s only 10% you will have PMI on your loan. On the flip side if you are refinancing and have less than 20% equity in your home your loan will have PMI.

Another definition of PMI is it is simply an added insurance policy for the lender or bank. If you are putting down 5 or 10% and end up defaulting on the loan the PMI policy helps the lender or bank recoup some losses. look at it as a risk assessment on your bank or lenders behalf. The less you have vested in the loan the greater the risk for the bank and hence the need for PMI.

How Long do I have to pay PMI? It depends on how much you put as a down payment or how much equity you had when you refinanced. Your lender by law has to remover your PMI once you have payed your loan down to 78% loan to value. You also have the right to request that your lender remove the PMI if you feel that your property has increased in value in which case an appraisal may be necessary.

Benefits of PMI If you do not have 20% to put down as a down payment or do not have enough equity in your home to make your loan to value 80% PMI plays an important role for you. As I mentioned earlier PMI is basically an added insurance policy for lenders to protect against loss if you are putting a smaller down payment down or refinancing and do not have a lot of equity. Basically if you fall into the category of someone who does not have 20% to put down and you are the majority PMI enables you to  purchase and not have to wait to accumulate that nest egg for a down payment to buy a home

There are some no-no’s that you need to avoid when seeking out your mortgage. If you are purchasing a home for the first time or even looking to refinance your existing mortgage here are some things to take seriously:

 - This statistic is overwhelming, do not buy a car while you are applying for a mortgage on that new home. It potentially could come back to haunt you. The stats are somewhere around 1 in 3 will buy a new car around the same time they are buying a home. Buy the car after you have closed on that new home.

 - Avoid making large purchases on your credit cards during your mortgage application process. Buy that new furniture set after you close.

 -If you are contemplating what to do if you have run yourself into a lot of credit card debt, one thing to avoid like the plague is credit counseling. It will drop your FICO score and some lenders will not lend to individuals who are in credit counseling.

 -Avoid bankruptcy and foreclosure for obvious reasons.

 -Avoid late payments on your credit cards. If at all possible never make your payment 30 days past the due date.

 -Avoid mortgage lates. If you are trying to refinance and have late payments on your existing mortgage you will have an uphill battle. Your mortgage is due the first of each month, you have a grace period typically till around the 15th of the month after which you may have to pay a late fee. Do what you can to ensure that your payment is received by your lender within 30 days of the due date. Your credit score will not be affected if you send your payment to your lender after the 15th but make that payment on the 31st of the month rest assured it is going to affect your credit score.

 -Avoid listing your property for sale and then try to refinance. Odds are you will not be able to refinance with most lenders.

 -Always get two opinions. If you are refinancing or buying get two rate quotes, never assume that the one person you call is the one with the best rate you may be able to do a  little better.

 -Always I mean always tell your mortgage broker if anything arises during your mortgage application. I cannot begin to tell you how many times borrowers have changed jobs during the process and never mentioned it. The majority of the time the consumer assumes that it is not a big deal, it is so make a point to mention it.

Shopping for mortgage rates in CT is as simple as a click away www.EversleyCapital.com

The worst thing you should do is nothing! Some people really have no idea what their credit is like or what their score is and then their are people that do know.

If you fall into the category of people who know their credit is “not so hot” you need to be pro active. Do not assume that there is no hope in finding a loan. Do not get me wrong if you know your credit is not good it is certainly going to be harder than someone who’s credit is excellent but you are not completely out of options.

My advice is even if you know your credit has some dings sit down with your mortgage broker and see what is available, you would be surprised at what options you have. You may just have to put more of a down payment down but still will qualify for that loan. Maybe both you and your wife or fiance need to apply jointly for a loan. And if by chance your credit is in need of dire repair ask what advice your mortgage person can give you. I can speak from experience that a lot of the time some people’s credit has erroneous reports on it and helping write a letter or two to the credit bureaus to get it corrected has brought their score up substantially and improved their credit, allowing them to get a better mortgage option. If your mortgage person is not willing to do this with you he or she may be able to recommend a credit repair company to help.

Even if your credit is at a point where getting a loan today is not an option you should still sit down with your mortgage broker and see what steps you can take to improve the situation in the future. And work on cleaning up your credit to be able to purchase a home in the future.

I am always happy to direct and help someone improve their credit. If it benefits you, hopefully in the end it will benefit me and allow me to get a loan for that person. It is the old give and take adage. I am willing to help that person out to be able to have the possibility of their business in the future.

Applying for and shopping mortgage rates in Connecticut is a click away www.EversleyCapital.com