The Making Home Affordable program will be increasing the maximum allowed Loan-to-Value ratio from 105% to 125% soon.
I will keep you updated when this occurs, but this is will help give more homeowners the opportunity to refinance. The program does have stipulations, which I have blogged about both here and here.
Let me know if you need help researching this or if I can help you refinance under this program.
The 5/1 is coming out swinging.
The following is a comparison of today’s 5/1 and 30 Year Fixed. The rate quote assumes 80% Loan-to-Value ratio, single family home, 720+ FICO, no impounds. Quote is based on a 30-day lock, and yes, I can close in 30 days.
(Please note we can do better in rate or fees if you have 60% and less LTV and/or want an impound account). APR based on $400k loan amount.
5/1 ARM
0 points 4.625% (APR 4.690%)
1 point 4.250% (APR 4.399%)
30 Year Fixed
0 points 5.375% (APR 5.443%)
1 point 5.125% (APR 5.282%)
You can see that the spread in rate between the two programs is significant. The 5/1 with 1 point saves you ~$210/month, but remember that you are taking on more risk in the future by choosing the 5/1 (the lower rate) now. In 5 years, your loan will adjust to a new interest rate that will depend on the market at that time. I wrote about the adjustment process here.
In March, Mortgage Insurance (MI) companies for conventional loans cut their max Debt-to-Income ratio from 55% down to 41% max. I blogged about it here.
Now, the new and more strict requirement, which is going into effect next week, is an increase in minimum credit score. The new FICO requirement is increasing from 700 minimum to 720 minimum.
Remember that Mortgage Insurance is required when you have less than 20% down. Your credit score is so crucial to any type of loan you can get, so please always be aware of what you can do to maintain and improve it. And, as always, let me know if you need help in figuring this out.
I am very much a “roll with the punches” kind of person. Things change, new laws are implemented, new disclosures are required… it’s okay, I get it and I roll with it, explaining the “what” and the “why” without being bothered and understanding the reasoning behind it. So I change what I do accordingly and move on.
But I am NOT treating the Home Valuation Code of Conduct (HVCC) in this regard. I am passionate about fighting this new law because it is irresponsible and costly. These legislators just don’t get it. Let me tell you why:
Appraisers that used to take 3-4 days to get us an appraisal (at no extra cost) are now taking between 10 and 20 days, with no guarantee.
What does all this translate to? More money that you have to pay, both in the cost of the appraisal and in the cost of longer lock periods to accommodate how long these appraisal companies are taking. Longer lock period = higher interest rate.
I don’t understand how legislators don’t see that this law is hurting us, as consumers.
They need to find another solution.
Please join me in fighting the HVCC and sign the petition for reconsideration:
www.hvccpetition.com
I have posted many updates and explanations about the HVCC:
Click here to read my initial post about the background of the law
Click here to see the letter I wrote to a number of our governmental representatives
With a few exceptions, the rules for buying a vacation home mimic many of the rules for buying a primary home (at least in conforming loan amount limits).
If you need a high-balance loan amount ($417,001 to $729,750), the restrictions are much heavier and the requirement is 35% down with a 740 FICO.
To be considered a 2nd home, it must be at least 50 miles away from your primary home and considered a “resort” area. The biggest challenge for most people is qualifying with both payments.
Have you ever wondered where Jobs and Unemployment Rate unmbers come from? The short answer is “surveys,” but you may find this interesting.
Economists were expecting a Jobs Report number of 520,000 jobs lost for the month of May. Everyone was pleasantly surprised when the number came out today at 345,000. In addition, previous months’ numbers were amended positively (less jobs lost than previously reported).
In contrast to the positive (relatively speaking) Jobs Report number, the Unemployment Rate went up from 8.9% to 9.4%. I have always wondered why there can be such discrepancies in similar reports, so I want to share with you what I have learned.
The Unemployment Rate is calculated from a survey of 60,000 households. These households respond to questions about their current employment situation, and it is supposed to be a more accurate reflection of our current situation.
Now, although the Jobs Report is always an interest-rate driver, it isn’t very accurate and is subject to revisions (as above). This number is based on the birth-death ratio, which is a ratio based on averages – over several years – of new businesses over businesses that are no longer around. In addition to using averages, this ratio considers historical data and a whole lot of assumptions. You can imagine how inaccurate this number can be, especially when taking into account “good” economic times right along with today’s rough economic times.
The way the difference between these two reports was explained to me was that the Unemployment Rate is a reflection of our current situation, whereas the Jobs Report is a reflection of potential future trends. Both have significant effects on both the bond and stock markets, but the Jobs Report strategy seems like quite a stretch!
I have to first preface this post by stating that I am not a tax advisor and cannot guarantee any of the following information. But I can let you know some of the requirements and stipulations for qualifying for the First Time Homebuyer tax credit.
First time homebuyers who purchase a primary residence home between January 1, 2009 and December 1, 2009 can file for a tax credit of up to $8000. This tax credit is capped at 10% of the sales price (i.e. if you purchase a home above $900,000.00, you will still be capped at $8000, not 10% of a higher sales price).
A tax credit is much better than a tax deduction because it can translate into money in your pocket. For instance, if you end up owing $5000 in taxes at the end of the year, $5000 of the credit will be used towards paying those, and the remaining $3000 will come back as a refund to you. It’s a very hot incentive to get people to buy homes!
Here are some of the highlights and requirements:
If you exceed these limits, you can still be eligible for a partial tax credit.
The mortgage bond market got pummeled yesterday and we got multiple interest rate increases. From yesterday morning to this morning, interest rates went up by a full quarter percent (.25%), which is a significant day-over-day increase. From Thursday of last week, they have gone up by a full half a percent (.50%).
What caused this? Well, a few factors that have been in the making, but first I have to backtrack.
The first thing to know is that what has caused these extremely low rates throughout the year was the Fed’s guarantee that they would purchase $1.25 Trillion in Mortgage-Backed Securities (MBS). These securities – and the price they’re trading at – are what drive interest rates. With the guarantee that the Fed will buy packaged loans on the secondary market, banks know that they have a guaranteed buyer, which will free up liquidity for them to lend to other people. So the cycle continues … The Fed’s ultimate goal is to spur activity in the housing industry, which it has definitely done so, both in the purchase and refi markets.
Now, back to what has been happening this past week, and especially yesterday: it’s finally coming to a point where the Fed (after purchasing packaged loans) is also trying to sell them off, but is having trouble. We are relying on foreign investors, and foreign central banks, to buy our debts. So far they have done so, but some are starting to threaten that they will no longer buy. In addition, the 10-Year Treasury bond is a lot more attractive than the lower yields on MBS, and traders would much rather gain more money through the 10-Year Treasury, meaning that mortgage bonds will start to increase in price, meaning that interest rates go up.
I am definitely not an expert and there are so many other driving factors that we can’t even grasp our heads around, but this is just to give you an idea of one of the reasons rates are going up. I don’t see the steep uphill just yet, but the Fed-selling problem is definitely an issue that means we may have hit bottom a few weeks ago. Regardless, please remember that these interest rates are still amazing!
Up to $417,000: Conforming Loan Limit (the best interest rates and most “common-sense” underwriting).
$417,000-$729,750: High-Balance Conforming loans (this reverted back to a $729,750 loan limit, but it is temporary. It will go back to $625,500 at some point; I will keep you updated).
Above $729,750: Jumbo loans. If you’re looking for a loan above $729,750, the rules change drastically.
Each of these bracketed loan limits have different rules, guidelines and requirements. Interest rates and available loan products also vary depending on the different brackets.
When a mortgage professional quotes you an interest rate, you can decide to “lock” it in at the terms and fees quoted, or you can decide to wait and see how the market goes. Remember that if you do not lock in, that quoted rate and cost scenario cannot be guaranteed. Some tips on locking in this market:
Rates can be locked in for 15 day increments, meaning the rate lock will expire after 15, 30, 45 or 60 days. Your loan must fund by the time the lock period expires. You can always extend the lock, but it comes at a cost and generally is something we want to avoid. If the delay is due to the lenders’ fault or inability to do things in a timely manner, most will honor this and will extend the lock for free. If not … well, it’s my job to fight for that, and so far, I have not yet lost that fight.
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