203 k loans are back

203 k Loans

This is a loan that allow the borrower to role the purchase price and the rehab costs into the the loan.

With all of the shadow inventory, foreclosure inventory (bank, tax, municipal etc…) and refi volume going away, many lenders typically have and will gravitate towards the FHA 203(k) product as it has always been countercyclical and is not as interest rate sensitive as other loan types.

The programs can also be used to get people out of slightly underwater and minimal equity positions when they desire some home improvements.   If rising rates slow down values again this will continue to be a viable source of loans (customers doing home improvements ‘fix up, instead of moving up’.)

But so many times people forget about selling the 203k and the HomeStyle renovation products which allow a convenient way for borrowers to make renovations, repairs or improvements to existing residential properties or  a purchase loan  before they move into the home.

Banks have started to offer “construction to perm” loans again .Lenders are turning to Standard and Streamlined 203(k) as refinance volume dries up due to higher rates.

Wells Fargo offers a loan like this also. We had someone come down in the past to talk to us about it. Will try to get him back.

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.