First Time Home Buyer

Prospective home buyers -- especially first-timers -- have a lot of learning in front of them.

The world of real estate and home ownership are filled with complicated and complex terms, names, concepts and general jargon you're never
going to hear anywhere else.

One of these names is the Monthly Treasury Average, or MTA as it's called for short.

Definition of the Monthly Treasury Average

The MTA is one of several indexes to which banks, credit unions and other lending institutions attach their interest rates. When the Monthly Treasury Index goes up or down, lenders pay close attention and use the rise or fall to determine the interest rates they charge you.

Why the MTA matters

If you're buying a home you are probably doing it with the help of a mortgage (unless, of course, you have $500,000 in cash sitting aside for a rainy day).

When you get a mortgage, the bank, credit union or other financial institution loans you the money you need to purchase your home. The lender then charges you interest on your loan.

If you get a fixed-rate loan, the interest rate charged on your loan will, in many cases, stay the same for the life of your loan. If you get an adjustable-rate mortgage, or ARM, the interest rate on your mortgage will go up or down according to whichever interest rate index your bank uses to determine interest rate amounts.

One of these interest rate indexes is Monthly Treasury Average. The MTA is the average value, calculated over a 12-month period, of the constant maturity treasury (CMT).

To learn more about the Monthly Treasury Average (MTA), the constant maturity treasury, and any other mortgage-related term, be sure to speak to a financial professional. He or she can explain these names and terms in greater detail, and perhaps give you ideas on how to profit from them. Many people prefer one index rate, such as the Monthly Treasury Average, over the other available interest rate indexes.

The Commerce Department released new numbers Thursday revealing that U.S. housing starts (i.e. the start of constructing a new housing unit, such as an apartment, house, mobile home, or even a group of rooms) saw an increase in August of 1.5% to a seasonally-adjusted 598,000 annual rate. While the increase in August didn't meet economist expectations, it helped to offset the loss in June of 0.2%, which was the first after five straight months of increases.

Each month, the Commerce Department offers seasonally adjusted annual rates (SAARs) for "housing starts" as a way to gauge how many new houses are being constructed. The SAAR helps to decipher month-to-month data without allowing it to be affected by seasonal shifts that could create a sharp contrast in numbers. For instance, fewer houses may be built in the winter due to weather conditions. To account for the inevitable shift in new housing starts that may occur from November to December, SAARs are used to gather a reasonable average number each month.

The current Commerce Department report shows that the SAAR has increased, which is good news for U.S. builders looking for a positive outlook for single-family home sales. However, this news isn't so great for homeowners who are looking to sell their properties. This is because new housing starts represents more homes on the market that will undoubtedly compete with homeowner properties already on the market. On the other hand, home buyers can rejoice because more competition usually results in a decrease in home prices.

Currently, home prices are fluctuating around the country; however, bank analyst Meredith Whitney says home prices could drop as much as 25 percent in 2009's fourth quarter. Depending on which end of the spectrum you sit (homeowner vs. home buyer) this could be great or not-so-great news for you.

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To help stabilize the real estate market, President Obama passed into law a new stimulus act that will give qualified first time home buyers a $8,000 tax rebate. If you buy a home between now and December 1st as a first time home buyer who meets certain criteria, that money can be yours.

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