Mortgage Rates Decline
According to Freddie Mac on Thursday, the 30 year fixed rate dropped from an average of 4.78% to 4.71% from last week. This is the lowest since Freddie Mac compiled data since 1971. Rates have been low all year because of the Fed’s purchase of mortgage-back securities, which in end in the Sping of 2010. This is helping to push mortgage applications which increased 2.1% during the Thanksgiving week stated the Mortgage Bankers Association. But while rates are low, there are still tight credit standards which may hinder buyers qualifying for the lowest rates. Most buyers will need 20% down, and a high credit scrore in order to qualify. But the push has helped drive more than 4 percent in purchase applications and nearly 2 percent increase in applications to refinance existing loans.
More Cash Required for an FHA loan
The Federal Housing Administration officials are proposing policy changes for FHA-insured mortgage borrowers to help the agency increase its federally mandated funding requirements. Higher credit scores and an increase in the current minimum down payment may be what buyers across America will have to have an order to qualify for and FHA loan. This proposed change is due to increasing financial issues FHA has been facing, which has increased it’s exposure and led to more delinquencies. The Obama Administration may try to propose other ways of increasing closing costs instead of increasing the minimum down payment, such as increasing mortgage insurance premimums or raising minimum credit score requirements so that the change would only effect the lower scoring borrowers. This will make it harder for some but will also reduce the risk of FHA having financial difficulites. FHA’s traditional role was to help American’s reach their dream of homeownership. The details of the change aren’t expected to be final until next month.
According to the Mortgage Bankers Association, the number of Mortgage applications recieved fell last week, falling 12.3 percent compared to last week.
Most of the decline was in refinances, which fell 16.2 percent and the purchase index declined 4.8 percent. Except for 15-year rates, mortgage rates were down slightly:
- 30-year fixed-rate mortgages decreased to 5.04 percent from 5.07 percent.
- 15-year fixed-rate mortgages increased to 4.53 percent from 4.51 percent.
- 1-year ARMs decreased to 6.79 percent from 6.86 percent.
Fannie Mae and Freddie Mac are now able to allow up to 125% loan-to-value for existing loan refinances under the Home Affordable Refinance Program. The old limit was 105% loan-to-value. This move should help out borrowers who made their payments on time but were unable to refinance and take advantage of lower rates due to declining values on their homes. In addition the loan must be Fixed and fully amortized for >15 years to a maximum of 30 years. This is for manually underwritten loans only, and Fannie Mae is determining if the desktop underwriting engine should allow loan-to-value ratios above 105%. For more information please visit www.makinghomeaffordable.gov or call 1-800-7FANNIE. For Freddie Mac visit https://www.freddiemac.com/corporate.
A few weeks ago I was mentioning how the rates consumers pay are tied to their credit scores and tips on how they can improve them. Well now in light of the recent stimulus package, both Fannie and Freddie are planning large fee increases by toughening their credit score and down-payment rules on April 1, 2009.
If a buyer is purchasing a duplex, the buyer could be charged a 1 percent add-on to their interest rate. Lenders will be if their not already factoring in these higher fees. Now buyers with down payments of less than 25 percent will be charged a three-quarter point add-on penalty, no matter how high their credit score is.
Those who would like to refinance and take cash out could be charged three points depending on the amount of equity they have.
Source: Washington Writers Group, Kenneth R. Harney (02/15/2009)
