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Offlinelonestar2004
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Brokers say rising mortgages may usher in era of 40-year loans
    #5066603 - 12/15/05 10:47 AM (18 years, 3 months ago)

Brokers say rising mortgages may usher in era of 40-year loans


BRUCE SPENCE
Record Staff Writer
Published Wednesday, Dec 14, 2005


With predictions of 30-year, fixed-rate mortgages creeping up to 7 percent next year, mortgage and real-estate brokers say 40-year, fixed-rate loans could become commonplace as people try to get into a home.

In its annual forecast, the California Association of Mortgage Brokers, based in Sacramento, projected that mortgage rates will reach an estimated average of nearly 7 percent for 30-year, fixed-rate mortgages and that 40-year, fixed-rate loans will become an important option for buyers.

"It's all about affording the home," said David DiDio, a mortgage broker and real estate agent with Greene Dream Homes and Loans in Stockton. "Everybody's looking for the lowest monthly payment available.

"Mostly, 40-year, fixed-rate mortgages will be popular with first-time buyers, who are looking for what's affordable to get them into a home," he said.

DiDio, president of the San Joaquin County chapter of the state mortgage brokers association, said he handled several 40-year, fixed-rate loans this year, only one of which was a purchase. The others were refinancing to get lower monthly payments, he said.




The rate depends upon on how solid someone's credit rating is, he said. A strong rating will get someone the same interest rate for either a 30- or 40-year, fixed-rate loan, DiDio said.

Those with less than a strong rating could have to pay up to one-quarter percentage point higher interest for a 40-year, fixed-rate loan, he said.

Housing affordability will remain an issue in the home-buying marketplace, the mortgage brokers group said, even though home prices are expected to stabilize.

Association President John Marcell said it's alarming that the housing affordability crisis will continue in California, making it difficult for first-time home buyers to qualify for adequate financing.

The mortgage association's November survey found that 60 percent of respondents think 40-year, fixed-rate loans will be more economical for home buyers next year.

Mortgage interest rates generally have been on the upswing, rising by more than one-half percentage point since the end of summer.

In last week's weekly survey by mortgage giant Freddie Mac, a 30-year, fixed-rate mortgage averaged 6.32 percent nationally. That compares with a 5.98 percent rate Oct. 6, the last time the 30-year, fixed-rate average stood below 6 percent.

In San Joaquin County, real estate brokers had been predicting that home prices would level off as the number of homes on the market climbed steadily over the summer. In the past few weeks, however, some real estate brokers began predicting price declines of up to 15 percent over the year as the number of homes for sale continues to climb.

Home affordability in San Joaquin County took a slight upswing in October, according to the latest survey by the California Association of Realtors that measures the ability of a household to buy a median-priced house in the area.

In October, 11 percent of households in the county could have afforded a median-priced home at $403,380. A purchase would have required an annual household income of $96,200, based on an average effective mortgage interest rate of 6.03 percent and assuming a 20 percent down payment.

That was up from only 10 percent of households in September, when an annual income of $98,050 was needed to buy a median-priced home at $415,820.

Mike Collins of Century 21 Collins Realty in Stockton said he thinks many home buyers will consider 40-year, fixed-rate mortgages as a purchase option, although some may blanch at the thought of a loan term that long.

"It is psychologically intimidating, and it's a monster if you total up all the interest you would be paying over the years," he said.

While the typical buyer as recently as 20 years ago planned to stay in a home for many years, today's buyers are much more transient, he said.

The amount of interest paid in the first 10 years of a 30- or 40-year, fixed-rate loan would be pretty similar, Collins said.


"Considering that most home loans are turned over in the first seven to 10 years, I don't think it would make much difference," he said.

Dale Gray, chief executive officer of the Central Valley Association of Realtors, said 40-year, fixed-rate loans have been around for a while, just not widely publicized.

He said he doesn't think the longer term will be much of a factor in decision-making about loans, since it would be a rare 40-year loan that would go full term.

The forecast said other popular mortgage products next year will include reverse mortgages, 100 percent financing and adjustable loans with low start rates.

Seventy percent of those surveyed said they think that while alternative loans may be a solution for some home buyers, they can be risky for others.

The association warned that consumers should make sure they understand all loan terms and conditions before signing.

"Alternative loans make the dream of homeownership a reality for some consumers, but it is important to realize they are not for everyone, and there can be pitfalls," Marcell said.
http://www.recordnet.com/apps/pbcs.dll/article?AID=/20051214/NEWS01/512140334/1001



40-year loans??? whats next 60 year loans???

and i know a lot of people who now have 6 year car loans.

is this a bad sign (economy)???

is the bottom about to drop out?


--------------------
America's debt problem is a "sign of leadership failure"

We have "reckless fiscal policies"

America has a debt problem and a failure of leadership.

Americans deserve better

Barack Obama

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