We hope these charts provide food for thought for anyone wondering if now is a good time to get off the fence regarding a home purchase or refinance. They are all really good charts but the last one is a great example for the first time home buyer.
The short answer is ‘not much’ (rates are continuing in the mid 3’s) and here is the ‘why’….
Stock market is performing well – this is typically bad news for mortgage interest rates
Concerns over the EU and Cyprus debt woes – this is good news for mortgage interest rates (caused by a flight to the safety of the US bond market)
Our mixed economic news causes a tug-of-war with mortgage rates
i. When we get good news in the economy this generally causes interest rates to go up
ii. Bad unemployment figures, for example, cause rates generally to trend downward
….And the back and forth continues while the interest rates remaining fairly consistent.
Here are a couple of interesting tidbits to pass along:
The number of underwater mortgages has declined by almost 12% since the peak at the end of 2011
Freddie Mac predicts that interest rates will likely go lower this spring – and home sales will jump 10% in 2013
Fannie and Freddie have extended the HARP refi program till 2015 (but they’ve kept in place the requirement that the current mortgage lien must have been purchased by them prior to June 2009 in order to be eligible)
With the High end market heating up a bit, we thought it would be timely to share some financing options available from Evergreen Home Loans. Many of you know that Kimberly and I are licensed in WA, CA and ID so we will include info on all three areas.
If you have a unique property or buyer please give us a call – we’ve got 5 or 6 top-notch Jumbo guidelines that we can pick and choose from to find you the winning combination for your transaction. Many of these options are internal to our bank (we underwrite internally), some of them are broker relationships we’ve developed….but options we do have.
Buyers need 700 FICO scores (but we have one investor that will go off the primary wage earner’s credit scores and the secondary wage earner can be lower)
Buyers will need some sort of reserves after closing – these are funds not used for the transaction but are available in an emergency after closing to pay the mortgage
Buyers will have a minimum down of 10-15%
Debt-to-income ratios will need to be below 41%-45%
Some Funky Stuff:
Loans over $5M
Cross Collateralization with other properties – to reduce the down payment on the new purchase
Using “Pledged Assets” for a portion of the down payment – investment funds don’t have to be liquidated
Up to 90% LTV (WA/ID) – we have two different NO PMI options available – up to $835,000 price
Up to 85% LTV (WA/ID)- $1,175,000 price
Up to 85% LTV (CA) – again, no PMI options are available – to $1,175,000 price
Above is a recent chart showing the increase of New Home Sales. Feel free to share with your clients.
On a good note:
HARP Refinances dropped 18.5% in October even with record low rates. This will be beneficial to all your purchase transactions because you won’t have as much competition for closing with fewer refinances in process.
Will the Mortgage Forgiveness Debt Relief Act of 2007 be extended by Congress by the end of the year? If not, homeowners will have to start paying income taxes on the portion of their mortgage that is forgiven in a foreclosure, short sale or principal reduction. That means if someone owes $150,000 on their home and it sells for $100,000 in a foreclosure auction, they could owe taxes on the remaining $50,000. For someone in the 25% tax bracket, that would mean paying $12,500 in taxes on the foreclosure. Similar taxes would apply for amounts that were forgiven in short sales and principal reductions." Attached is the link. Enjoy the read.
Many of you have had clients that are approved for a USDA loan, they find a property and because there is a man-cave/detached garage the property is immediately disqualified from USDA financing. WELL, NO MORE! They’ve changed the rules. Here’s the scoop:
The property must be residential in nature. They still won’t allow farm service buildings or buildings intended for commercial use. They don’t want to finance a property that is intended to be used to produce income.
What’s acceptable: A garage or storage shed for consumer use.
Farm related property still will not work.
Let’s say the price is $150,000 and your client intends to go USDA 100% financing.
The appraiser brings in the 24x24 detached garage at a value of $7,000 and an overall value of the $150,000
Financing will be based on $150,000 less $7,000 or $143,000.
So the buyer will have to bring in the $7,000.
Reasons why a borrower may still want to go USDA even though they have to come in with the funds for the value of the out-building:
USDA has lower monthly mortgage insurance than FHA
USDA has lower monthly mortgage insurance than a standard conventional loan and depending on the buyer’s credit scores, rates can be lower the a standard conventional loan (because of the risk based pricing)
There is more to this new announcement from USDA but we don’t want to get too deep in the weeds. If you’re interested in knowing more, please call or email and we’ll provide more detail.