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posted: 12/25/2016 7:00 AM

Buying a home can be traumatic

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By JIM WOODARD

Many of today's consumers admit they are a bit fearful of entering into a home purchase or selling transaction. They feel they are not capable of handling the financial and complex aspects of the transaction.

A new nationwide survey reveals that half of U.S. consumers say they lack the financial education needed to purchase a home. What's more, 44 percent of consumers say they find the homebuying process scary or intimidating, it was reported by the National Association of Realtors.

"Ninety-two percent of consumers surveyed say that owning is a better long-term financial decision than renting. Yet, only 30 percent know where to start when it comes to buying a home, according to the survey conducted by Sente Mortgage, an independent mortgage bank.

"Younger generations may particularly be lacking enough financial knowledge to move forward. More than 30 percent of millennials say they don't know the mortgage amount they could afford, and 25 percent say they don't understand the long-term financial impact of buying a home."

The report also notes the complexities involved in buying a home.

"The home buying process is complex, and it's clear that for many of today's consumers, gaps in financial education are leading to some risky purchase behaviors," says Tom Rhodes, CEO of Sente Mortgage.

"Unfortunately, many of the most valuable resources available to buyers go grossly underutilized, but with the right guidance and support, owning a home can be one of the biggest contributing factors to long-term financial success."

Many homebuying consumers admit to not spending enough time shopping for a mortgage. Eleven percent of consumers say they were more likely to seek advice and recommendations when planning a vacation than when buying a home.

Q. When will the Federal Reserve raise interest rates?

A. The Fed raised interest rates by a quarter of a percent on Dec. 14. It was a move largely predicted by economists.

"The Fed does not set mortgage rates. Short-term rates are different from long-term rates. Mortgage rates typically follow long-term bond rates, such as the 10-year U.S. Treasury note. Longer-term rates typically adjust before the Fed makes a move," according to the National Association of Realtors.

"Indeed, mortgage rates have risen near to 60 basis points since the presidential election. More than twice the quarter-point increase that the Fed voted. The Fed announced that it expects to raise short-term rates three times next year by a total of 75 basis points."

Q. Are mortgages more readably available?

A. Mortgage credit availability increased in November, according to the Mortgage Credit Availability Index, a report from the Mortgage Bankers Association which analyzes data from Ellie Mae's AllRegs Market Clarity business information tool.

The MCAI increased 1.6 percent to 174.1 in November. A decline in the MCAI indicates that lending standards are tightening, while increases in the index are indicative of loosening credit. The index was benchmarked to 100 in March 2012.

Of the four component indexes, the Conforming MCAI saw the greatest increase in availability over the month (up 2.2 percent), followed by the Government MCAI, it was reported.

Q. What is pushing up mortgage interest rates?

A. Here's a statement from Sean Becketti, chief economist, Freddie Mac:

"The 10-year Treasury yield remained flat despite an upward revision to third quarter GDP. The 30-year mortgage rate rose 5 basis points to 4.08 percent, rising a total of 51 basis points in three short weeks.

"With mortgage rates at the highest we've seen this year, borrowers are now backpedaling on refinance opportunities. The latest Weekly Applications Survey results from the Mortgage Bankers Association show refinance activity down 16 percent week over week."

Q. Are commercial mortgages getting stronger?

A. Here's a recent report from the Mortgage Bankers Association:

"Commercial and Multifamily mortgage delinquencies were once again quite low in the third quarter, because of the continued strength in the market fundamentals," said Jamie Woodwell, MBA's Vice President of Commercial Real Estate Research.

"Delinquency rates generally fell, staying near 20-year lows for loans held by banks, life insurance companies and Fannie Mae and Freddie Mac."

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