Good morning,
The stimulus bill has passed but lenders don’t have the changes in place to offer the higher loan amounts to agency approved customers. Apparently HUD has 30 days to come up with the posted numbers for our area after changing their systems, documentation, etc. Then the lenders will update theirs. This process could take a little longer than we all thought. 30 days? 60 days? The jumbo loans, or newly conforming loans or whatever you want to call them are going to be submitted in separate pools and we are not sure if the pricing will be worse for these types of loans. For now we have to wait and see and know that good news is coming.
NOTE* If you didn’t see the “Ignore the Headlines” article in the February 25th issue of Time Magazine, you may want to take a look. Famed money manager Peter Lynch explains that the inevitable rise in interest rates may extinguish a borrower’s advantage to get into more house, for a lower rate. It might be a good article to have on hand for indecisive borrowers. A half point worsening to rate on a $220k home could mean $20k+ less that one would qualify for with the same payment. It’s a little more complicated if one is selling their home but if you are buying or refinancing there may be no better time.
As far as Mortgage insurance goes; the word on the streets is that MGIC is going to update some of their guidelines on March 3rd. In a recent Washington Post article from February 16th, Kenneth Harney he mentions changes that will include: 680 min ficos for homebuyers with less that 5% down (same applies to less than 10% down in declining markets) – no more cash out refis on investment properties – reduced doc programs will require a 660 fico and have to show 50% of their income coming from self-employment sources. This all comes after MGIC estimated they would lose over a billion in the 4th quarter. Keep in mind that FHA products will come into play a lot more now that the MI companies are struggling with lower ficos and higher LTV’s.
In other words there is more tightening coming in for riskier loans. Consumers have to qualify under much more stringent processes due to the avalanche of foreclosures and delinquent loans. Sub Prime is still existent but the rates and payments are inflated and the terms in general are short. FHA is the new Alt-A and there are a few ways to structure these loans. 100% financing is still available at beautiful rates but that is through CalHFA and you must fit the parameters. Pretty much all financing is subject to risk based pricing.
The great news is that money is cheap, there is a ton of inventory and the loan limits for GSE (Fannie and Freddie) loans are increasing… it just remains to be seen how much.
The stimulus bill has passed but lenders don’t have the changes in place to offer the higher loan amounts to agency approved customers. Apparently HUD has 30 days to come up with the posted numbers for our area after changing their systems, documentation, etc. Then the lenders will update theirs. This process could take a little longer than we all thought. 30 days? 60 days? The jumbo loans, or newly conforming loans or whatever you want to call them are going to be submitted in separate pools and we are not sure if the pricing will be worse for these types of loans. For now we have to wait and see and know that good news is coming.
NOTE* If you didn’t see the “Ignore the Headlines” article in the February 25th issue of Time Magazine, you may want to take a look. Famed money manager Peter Lynch explains that the inevitable rise in interest rates may extinguish a borrower’s advantage to get into more house, for a lower rate. It might be a good article to have on hand for indecisive borrowers. A half point worsening to rate on a $220k home could mean $20k+ less that one would qualify for with the same payment. It’s a little more complicated if one is selling their home but if you are buying or refinancing there may be no better time.
As far as Mortgage insurance goes; the word on the streets is that MGIC is going to update some of their guidelines on March 3rd. In a recent Washington Post article from February 16th, Kenneth Harney he mentions changes that will include: 680 min ficos for homebuyers with less that 5% down (same applies to less than 10% down in declining markets) – no more cash out refis on investment properties – reduced doc programs will require a 660 fico and have to show 50% of their income coming from self-employment sources. This all comes after MGIC estimated they would lose over a billion in the 4th quarter. Keep in mind that FHA products will come into play a lot more now that the MI companies are struggling with lower ficos and higher LTV’s.
In other words there is more tightening coming in for riskier loans. Consumers have to qualify under much more stringent processes due to the avalanche of foreclosures and delinquent loans. Sub Prime is still existent but the rates and payments are inflated and the terms in general are short. FHA is the new Alt-A and there are a few ways to structure these loans. 100% financing is still available at beautiful rates but that is through CalHFA and you must fit the parameters. Pretty much all financing is subject to risk based pricing.
The great news is that money is cheap, there is a ton of inventory and the loan limits for GSE (Fannie and Freddie) loans are increasing… it just remains to be seen how much.
I’ll keep you posted as developments evolve.
Final Thought on taking action…
I will act now. I will act now. I will act now. Henceforth, I will repeat these words each hour, each day, everyday, until the words become as much a habit as my breathing, and the action which follows becomes as instinctive as the blinking of my eyelids. With these words I can condition my mind to perform every action necessary for my success. I will act now. I will repeat these words again and again and again. I will walk where failures fear to walk. I will work when failures seek rest. I will act now for now is all I have. Tomorrow is the day reserved for the labor of the lazy. I am not lazy. Tomorrow is the day when the failure will succeed. I am not a failure. I will act now. Success will not wait. If I delay, success will become wed to another and lost to me forever. This is the time. This is the place. I am the person.
~Og Mandino 2/19/08
Final Thought on taking action…
I will act now. I will act now. I will act now. Henceforth, I will repeat these words each hour, each day, everyday, until the words become as much a habit as my breathing, and the action which follows becomes as instinctive as the blinking of my eyelids. With these words I can condition my mind to perform every action necessary for my success. I will act now. I will repeat these words again and again and again. I will walk where failures fear to walk. I will work when failures seek rest. I will act now for now is all I have. Tomorrow is the day reserved for the labor of the lazy. I am not lazy. Tomorrow is the day when the failure will succeed. I am not a failure. I will act now. Success will not wait. If I delay, success will become wed to another and lost to me forever. This is the time. This is the place. I am the person.
~Og Mandino 2/19/08
