Tx Mortgage News: Why you need to buy before March 1, 2008
December 30, 2007
Texas Mortgage News: Good News/ Bad News. Which do you want first?
The good news: Mortgage rates are really good. Even if rates go up in the next 3-6 months, it’s better to buy now than before the “credit crunch.” Contrary to popular opinion the real estate business isn’t dead. If fact, this is a great time to buy a home or investment property. Even if you need or want 100% (zero-down) financing–these programs are still available. Most of the full doc, owner-occupied, mortgage programs are still around, even to 100%. Remember, good news will never make the nightly news, so everything you’ve heard about the doom-gloom “credit crunch” isn’t true.
Bad news: This mortgage market is getting stricter though; especially on high-loan-to-value (LTV) home loans. What are high LTV loans? In English: Banks want you to put some money down when you buy a house. You don’t always have to, but banks are “rewarding” you with better rates when you put 5-10% down on your mortgage.
For example, If the home you want to buy is $250,000 a 100% LTV loan would be if you got a loan for–100%–or the full $250,000. It’s called zero-down lending. You could even roll your closing costs into the loan if this makes sense for your unique situation. Furthermore, a 90% LTV loan would be if your loan was 225k, with you bringing 10% down. 100% home loans have higher rates than 90% loans for obvious reason; 100% lending is riskier to banks so they make you pay a premium for it.
So the higher the LTV the higher the risk, the higher the rate. Mortgage rates are tied to the overall risk of the loan.
Once upon a time, in a not too distant place called Texas, one could get a 100% loan with no documentation. You just needed a good score and a smile. Most of these programs have gone bye-bye for justifiable reasons; people abused them.
During the last 6 months we have seen a gradual, steady tightening of mortgage guidelines particularly in those with credit scores in the 600-640 range. Because mortgage loan’s rates are partly tied one’s credit profile, we are now seeing banks wanting even higher credit scores on 80-90-100% home loans. Beginning March 1, 2008, those with a sub-680 can still get a mortgage they’ll just pay a premium for high LTV loans.
Beginning March 1, 2008, there will be an additional round of tightening. See chart below:
This Fannie Mae chart shows how mortgages will “cost” more (eg. higher rate) for those who aren’t putting 30% down. In a nut shell, the cost of your mortgage–the rate–will go up for those who don’t have a 680 credit score. Of course, there are exceptions, just email me and I’ll tell you jon@mylendingplace.com
How will the new rules affect your mortgage: Essentially, the market is making those with lower credit scores and higher LTVs pay more since, statistically, these borrowers have a higher risk of defaulting.
What should you do?: If you are in the market to buy within the next 3 months. Hurry. Find the right house, call www.mylendingplace.com and let us offer you the right fixed-rate mortgage, live happily ever after. Invite us to your house warming party. Also, if you’re thinking about doing a home equity loan to consolidate debt, please call me. Waiting will only make your rate higher.
Or if you are just tire-kicking and will likely close on your home after the March 1 deadline, please call me today so we can begin improving your credit scores together. Remember, you’ll need a 680 to avoid these pricing hits unless you plan to put some money down. (Again, there are exceptions like those who want a 15 year mortgage… email for the complete list jon@mylendingplace.com.)
While you’re looking for a home, let’s use this time to get your credit in the best possible shape.
Go to http://www.mylendingplace.com is and complete our secure-online application (free) and we’ll go over your credit report with you line-by-line. Most credit reports have at least 1 mistake so it’s always a good idea to review your credit report; especially if you’ve recently moved, got divorced, closed credit accounts or have a name like Jane or Jo(h)n Smith.
If your name is Jo(hn) Smith and you just closed a bunch of accounts, got divorced and moved from Tacoma–please buy me lunch as we probably have some work ahead of us…
Final note: Remember, we’ve seen a gradual, steady tightening of mortgage programs over the last year. BUT, rates are still better now than they were a year or so ago–even with these rate hits! So it’s all about perspective. BUT #2, don’t ignore this if you’re planning to buy or refinance because waiting may just leave you open to another round of credit tightening.
Seriously, call me today so I can review your credit and help improve your scores. We look forward to your call.
Posted in Mortgage News
Serving all of Texas
512-996-8194
Texas Mortgage Refinance Broker
#56651
