The skinny on mortgage rates

The pendulum is swinging back again. After years of scrooge like actions by the banks, things are changing.

Rates are up to 4.6% for a 30 year fixed. If you hear lower rates quoted its because they are charging lots of points and fees. That’s the difference between the rate and the apr. The wider the difference, you more junk you are paying. The best rates are ones that have the quoted rate and the apr as the same.

This  amazingly fast mortgage rate climb continues to be one of, if not THE most significant move in the modern history of mortgage rates (in terms of the pace of change)

The upside is that banks are now loaning more freely than they have been in the last few years. As rates climb, there is less refinancing going on so the banks are loosening up They are accepting lower downpayments and lower ficos

 In the last 2 years, there was a sevenfold increase in down payment requirements of between 3.5 and 5%/ THESE ARE NOT FHA LOANS. Even Wells Fargo is offering 3% downpayment loans.

Piggyback loans have returned. That’s also called a 80-10-10. You put down 10% and have a fisrt of 80% and a 2nd of 10%. It’s cheaper than having mortgage insurance.

In addition, the debt to income ratio is growing again. Things are not like the were before- you still have to qualify. It’s starting to look like a normal mortgage market.

FHA loans getting more expensive

For the third time in a year, FHA is increasing its fees on the mandatory Mortgage Insurance Premium. In addition, it will be with you for the life of the loan. You used to be able to dump it when you gained equity.

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First time home buyers left in the dust

Sales for first time homebuyers are going down. It’s really difficult for these folks. FHA does 50% of these loans and their underwriting requirments are so strict that few can get appoved.  In addition, the csosts for FHA loans are increasing which is also pulling some people out of the game.

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Condo rules relaxed by FHA

Even though the rules were meant for condo developments, this also applies to individuals looking to buy and sell condos.

I have previously told my students not to bother with condos unless it was owner financing or subject because it if you think it is tough to get a loan for a single family house, you should see what’s like for a condo, It ain’t happinin.

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Mtg delinquencies rise

More borrowers missed payments in the 2nd quarter. Number of homes going into foreclosure rose 6%. Before you start wringing your hands, remember all the hoops the govt put the banks through last year. They are just starting to work their way though again.  FHA loans were worse. California is doing better than other states because we are a trust deed state, not a judicial foreclosure state. That means that the bank only has to file paperwork to foreclosure. In other states, it’s like a law suit and there has to be a hearing in front of a judge. That takes more time. So our state will recover faster.

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