FHA Raises Loan Standards

Today the FHA is set to announce that it’s raising its standards for the loans it’s willing to guarantee. The new guidelines have a few big changes, but the one that will impact everyone, is the rise in initial insurance premium paid. In the new guidelines, the amount of MIP (Mortgage Insurance Premium) paid will rise from 1.75% to 2.25% of the value of the loan. Additional restrictions now include: the seller’s ability to help pay closing costs and minimum credit score for down payments. The new loan guidelines say the maximum amount of closing costs that can be paid by the seller is now 3% reduced from 6%. There will also be a credit score requirement in order to get the attractive 3.5% down payment. Borrowers will need a credit score of at least 580 if they want to put only 3.5% down. So what does this all ad up to?

If you’re thinking about buying in the next year it would be best to do it sooner rather than later. The tougher standards for FHA loans won’t impact most people’s ability to get an FHA loan, but it will cost you more to get one. It’s best to try and get any potential purchase done before these new regulations kick in rather than waiting till later. The other reason to buy now rather than later, is rising interest rates. Below, I’ve included a graph of interest rates in Massachusetts for the past month. In this graph, you’ll notice that mortgage rates are on the rise. As of today the average for a 30-year fixed is higher than it was a month ago and if you think back to November rates were right around 5% or for some, below 5% you can see we’ve had quite an increase.

Don’t get caught paying more later than you would if you bought today!

Mortgage Rates Below 5%

Just wanted to give a quick update to those savvy buyers looking to buy this fall. Mortgage rates are currently around or below 5%. The current 30-year fixed rate is 5.12% and there are some rates as low as 4.875% paying some origination/points. I will update this post with more info as it becomes available.

Banks Need to Start Lending

I was talking with another agent the other day, when he told me the following story. The bank in question I won’t name, we’ll just use their initials.

“My client, is 5 days away from the closing and the bank is refusing to give him a mortgage. The guy is putting 50% down and BOA won’t give him a loan. It just doesn’t make any sense! Even if the guy defaults, the bank picks up the property for half of what it’s worth and they can easily flip the property. If I had the money, I’d loan it to him it’s such a good deal.”

Now, having heard that story all I can say is: BOA it’s time to loosen the purse strings! You guys took over $45 billion in TARP money and it’s time you use it to help keep the economy moving. Anyone else going through something similar let loose in the comments.