The Economy, Condominiums, Rentals..Can I get the Loan?

First, due to a variety of factors, we've been in a falling interest rate market since Christmas of 2008. Slow economy, war, low inflation, higher unemployment all contribute to low rates. “Bad news” Is “Good News” for mortgage rates. The more negative the news is, the lower the rates get. The current market rewards those people who keep their debts low and their credit scores high. It penalizes those with less than stellar credit. Why do you hear "Loans are harder to get?" Part of it is the reasons just stated..other reasons are tighter lender restrictions for loans that are just off center of the standard owner-occupied, single family dwelling in a suburb. Properties that fall into that category are condominiums, investment properties, certain second homes, and homes that for whatever reason are in a neighborhood, where values are declining, rather than increasing.

What's going on with Jumbo loans?

What are "Jumbo" Loans" and why are the rates higher (than smaller loans)? The real name for these loans is a Non-Conforming loan. In Texas, this is any loan larger than $417,000. The limit was raised higher than $417,000 in some areas of the US but this did occur in Texas, due to our reasonable house prices. The largest loan that Fannie Mae and Freddie Mac, now fully government-owed entities, will buy from a bank/lender in Texas is $417,000. Loans less than $417,000 are called conforming loans. Most conforming are bought by Fannie/Freddie. On Jumbo's though, the bank/lender must hold and service those jumbo loans themselves, or sell them to a private investor. Fannie/Freddie is not involved. In times past, with lower default rates, it was easy to find or service a jumbo loan. Now these larger loans are viewed as riskier than in the old days. Consequently, there is a larger "spread" in the interest rates - Jumbo loans may be .750 % to 1 % higher than conforming loans, depending on the Bank/Lender.

The Housing Bill...

We’ve all heard about the Housing Bill that has been signed by the President. Now we wait for the actual roll-out. Mortgage Insurers (MI companies) and lenders all have to ‘run the numbers’ and see how they actually want to price these products. HUD has to determine what the median price of a home is in different markets. While the bill raises certain lending limits, lenders and MI companies have the option of adding their own spin –their own pricing hits- to the new limits. After all, they are on the hook for a larger amount of money, depending on their agreements with Fannie Mae. Lenders are suffering huge losses, so they will be looking at the numbers carefully. On another subject, mortgages interest rates are almost exactly what they were one year ago.

Early April - Finally !!!

We've survived TWO WHOLE WEEKS without a meltdown of a major financial institution - sad when that becomes a good two weeks! Look for rates to stay steady unless an unforeseen crisis occurs. The increase in unemployment rates, unfortunately, helps keep rates steady or fractionally lower in the short term. We'll see what the next few weeks bring.

Last 10 days of March - Feds to the Rescue

The Feds are doing everything they can to jump start the housing sector of the economy. They announced today they are allowing Fannie and Freddie to hold MORE mortgages then previously allowed. They are also allowing banks and investors to swap mortgages for cash. They also cut the Fed Rate by 3/4 of a point. While this raises rates when the cut occurs, it generally has the effect of lowering rates over time. We're still not at the 4 year low we hit in rates in October 2007 but we're getting there slowly. The lenders are raising loan qualifications. 100% loans are still available for the very strongest buyers. Though not true for every borrower, a 3% down payment is becoming the norm for a large number of buyers.

Middle March Madness or Stability ?

The Federal move to create $200 Billion in monies for large investment firms and banks to lend short term has provided a nice stabilization point. Continue to watch for volatility in the mortgage marketplace as presidential election new, congressional stopgap programs and company financial reports continue to affect the market.

Market Update - Early March 2008

Rates continue to be slightly volatile, though historically low. We had a four year low about four weeks ago! Rates are up slightly from that. Although some 100% loans are available for home purchases, we are encouraging a small down whenever possible. Considering the amount of foreclosures on the market and a recent historic low in rates, the best combination for the buyer is a competitively priced house with a small down payment. Happy House Hunting!