100% financing is obviously a big deal in the mortgage market! We have been fielding numerous questions on this product lately. Is it still available? How much longer will it be available? Is it harder to qualify for now? These are all valid questions. Some of which we have the answer for and some we don't. 100% programs are still available, but the number of lenders offering them has dwindled. The qualification for this program has changed for some lenders as well. It is harder to qualify with some lenders now as the credit score requirement went up to 680 or above. On top of that a higher rate is offered for borrowers under a 720 score than was previously offered. There are a few out there that haven't changed their requirements, but there is no way of knowing how long this will last! Lastly, there is the question of how long 100% programs will be available period! This is a big unknown. At this point we have not heard confirmation that any changes are being made. However, in this crazy market any change is game! Change can come at any minute and we are at the mercy of the PMI companies, since they are the ones who insure loans above 80%. Any changes they make will be relayed to us through the lenders. If this happens, 100% loans will be gone and we all hope this does not happen. This will knock many potential buyer's out of the market and I cannot see how this is a good thing right now! Lenders have already made all the necessary underwriting adjustments and program changes that are necessary moving forward. It just will take time for them to "right the ship". There is no overnight fix and it seems all sides are trying to find one!
Again, the purpose of this blog is educational and we want to put out what information is out there. It is not our intention to scare anyone off or give the impression there is "new" news out there. This is a topic that has been rumored for quite some time. We have just received more questions on it lately and the rumors have gained more steam. If you are in the market for a home and NEED a 100% program, one way to secure the program is locking in ASAP (if your purchase will occur within one of the available locking periods).
As always we will keep you posted on any new developments!
Brought to you by:
Professional Mortgage Group, Inc.
Friday, March 21, 2008
Thursday, March 20, 2008
Boone County Roundtable
I recently attended a "Round Table" Luncheon with some local real estate professionals (i.e. appraisers, real estate agents, bankers, attorneys, brokers, developers and builders) and I thought I would shed some light on the challenges facing many of these individuals. I'll just throw out some of the verbage that was used in the meeting.
- Fear
- Education
- Volatility
- Offers being "low balled"
- Comp concerns and marketing time
- Original List Price to Selling Ratio
- Qualifying for Loans or programs changing at the last minute
- Bad Publicity or Wrongful News
- Interest Rate Volatility
All of the obstacles above and many more are what face real estate professionals in and around Boone County Missouri. I must say that it was very "refreshing" hearing others point of view on what's happening in the industry and how it affects them and their clients. What's my point? Boone County has issues that need to be addressed but given time, careful thought, and learning from errors we will overcome all of these and any others that rear their ugly head. We are a very strong community of individuals that possess uncanny intelligence and creative thinking. Also, we are not in as bad of shape that many have been led to believe! Columbia experienced exponential real estate growth during the "boom" years and in particular 2002'-2005'. It is very hard to sustain this type of growth over an extended period of time and as the cycle runs we have taken a spike downward since mid 2006'. After attending this luncheon I feel very secure that we (lenders, bankers, developers, builders, agents, etc.) are doing the right thing moving forward. We are already starting to see an increase in housing traffic, offers, a decline in housing inventory, and a "pull-back" in spec building. Just like anything else in life we will survive and be a better community for it!
Brought to you by Professional Mortgage Group, Inc.
Your Columbia Missouri Mortgage Broker
- Fear
- Education
- Volatility
- Offers being "low balled"
- Comp concerns and marketing time
- Original List Price to Selling Ratio
- Qualifying for Loans or programs changing at the last minute
- Bad Publicity or Wrongful News
- Interest Rate Volatility
All of the obstacles above and many more are what face real estate professionals in and around Boone County Missouri. I must say that it was very "refreshing" hearing others point of view on what's happening in the industry and how it affects them and their clients. What's my point? Boone County has issues that need to be addressed but given time, careful thought, and learning from errors we will overcome all of these and any others that rear their ugly head. We are a very strong community of individuals that possess uncanny intelligence and creative thinking. Also, we are not in as bad of shape that many have been led to believe! Columbia experienced exponential real estate growth during the "boom" years and in particular 2002'-2005'. It is very hard to sustain this type of growth over an extended period of time and as the cycle runs we have taken a spike downward since mid 2006'. After attending this luncheon I feel very secure that we (lenders, bankers, developers, builders, agents, etc.) are doing the right thing moving forward. We are already starting to see an increase in housing traffic, offers, a decline in housing inventory, and a "pull-back" in spec building. Just like anything else in life we will survive and be a better community for it!
Brought to you by Professional Mortgage Group, Inc.
Your Columbia Missouri Mortgage Broker
Wednesday, March 19, 2008
The Truth on Boone County Missouri
Over the past week or so I have heard so much miss-information concerning Boone County and its designation as a "declining market" that I really feel sorry for the individuals both releasing it and those who read it. So much so that I recently read an article released from a Boone County business that couldn't even spell Fannie Mae (or "May" as they put it) correctly. The purpose of this post to lay out the truth and hopefully lay to rest the rumors that are floating around out there.
First, Freddie Mac (not Fannie Mae) has designated Boone and Howard counties as "declining" markets. What does this mean? Simply put it will impact buyer's loans who want to purchase a home in this area or more specifically reduce their borrowering ability by 5%. For example if you have a buyer wanting to do 100% loan they now must put at least 5% down to qualify for a loan through Freddie Mac.
Second, Fannie Mae although very similar to Freddie considers markets as "soft". They scale this out from 1 to 5 with one being the best and five being the worst. Information released effective March 18th has Boone County as a soft market area of 1. Therefore any loan going through Fannie Mae will be able execute the maximum financing available as long as 3 things happen. First, the appraiser notates that the market is "stable" and not declining. Second, the marketing time for the area in question is less than 6 months. And three the appraiser does not note any other "negative" factors that would "suggest" a declining market. Simply put under normal operating procedures "most" deals should be fine. Anyone designated as a soft market 1-3 will implement the above guidelines. Markets designated as 4-5 must reduce the maximum allowed financing by 5% (like Freddie Mac). Again, Boone County is a 1!!!!
Third, there seems to be a notion that 100% financing is not available anymore and nothing could be further from the truth! There also seems to be a notion that you must have at least a 680 credit score to qualify for 100% financing these days. Again both of these assumptions are not true. I currently have access to 100% programs for Boone County down to a 620 credit score and yes they are through the GSE's or more specially Fannie Mae. There is financing available through the USDA that allows for 100% financing in certain "targeted" areas and at times down to a 580. We, has Missouri residents also have access to MHDC (Missouri Housing Development Corp.) that allows for 100% financing. Oh and let's not forget the growing FHA programs where for as little as 3% down you can qualify for financing regardless of credit score.
Of course changes to these programs happen quite often (none of them very significant) and yes the availability to access the funds to some of these programs can, at times be aggravating. However, the programs are alive and well and I continue to access these programs every day to help my clients purchase their home!
Most of the issues surrounding the rumors concerning the termination or "scaling back" of certain programs come from the changes of the Mortgage Insurance Companies. For those of you who do not know these companies are responsible for ensuring the dollar amounts above and beyond the 80%. For instance, if you have someone purchasing a $150,000 home and doing a 100% loan the "MI Company" would ensure the 20% down payment or ($30,000) that the borrower is financing. Now as you can imagine with the fall out in the mortgage and housing industry MOST of the MI companies have lost billions of dollars. In response to this they have really cut back their product line and in essence there desire to ensure some loans, this is why you see all the guideline changes to ltv, mi premiums, down payment requirements and credit scores. But like anything else in life these same companies have competition so what RMIC cannot do AIG otherwise known as United Guaranty can. And what PMI does not touch anymore MGIC will do and the list goes on and on. The important thing to remember is that there are some MI companies still ensuring 100% loans as long as the borrower meets their guidelines.
Brought to you by Professional Mortgage Group, Inc.
Your Columbia Missouri Mortgage Broker
First, Freddie Mac (not Fannie Mae) has designated Boone and Howard counties as "declining" markets. What does this mean? Simply put it will impact buyer's loans who want to purchase a home in this area or more specifically reduce their borrowering ability by 5%. For example if you have a buyer wanting to do 100% loan they now must put at least 5% down to qualify for a loan through Freddie Mac.
Second, Fannie Mae although very similar to Freddie considers markets as "soft". They scale this out from 1 to 5 with one being the best and five being the worst. Information released effective March 18th has Boone County as a soft market area of 1. Therefore any loan going through Fannie Mae will be able execute the maximum financing available as long as 3 things happen. First, the appraiser notates that the market is "stable" and not declining. Second, the marketing time for the area in question is less than 6 months. And three the appraiser does not note any other "negative" factors that would "suggest" a declining market. Simply put under normal operating procedures "most" deals should be fine. Anyone designated as a soft market 1-3 will implement the above guidelines. Markets designated as 4-5 must reduce the maximum allowed financing by 5% (like Freddie Mac). Again, Boone County is a 1!!!!
Third, there seems to be a notion that 100% financing is not available anymore and nothing could be further from the truth! There also seems to be a notion that you must have at least a 680 credit score to qualify for 100% financing these days. Again both of these assumptions are not true. I currently have access to 100% programs for Boone County down to a 620 credit score and yes they are through the GSE's or more specially Fannie Mae. There is financing available through the USDA that allows for 100% financing in certain "targeted" areas and at times down to a 580. We, has Missouri residents also have access to MHDC (Missouri Housing Development Corp.) that allows for 100% financing. Oh and let's not forget the growing FHA programs where for as little as 3% down you can qualify for financing regardless of credit score.
Of course changes to these programs happen quite often (none of them very significant) and yes the availability to access the funds to some of these programs can, at times be aggravating. However, the programs are alive and well and I continue to access these programs every day to help my clients purchase their home!
Most of the issues surrounding the rumors concerning the termination or "scaling back" of certain programs come from the changes of the Mortgage Insurance Companies. For those of you who do not know these companies are responsible for ensuring the dollar amounts above and beyond the 80%. For instance, if you have someone purchasing a $150,000 home and doing a 100% loan the "MI Company" would ensure the 20% down payment or ($30,000) that the borrower is financing. Now as you can imagine with the fall out in the mortgage and housing industry MOST of the MI companies have lost billions of dollars. In response to this they have really cut back their product line and in essence there desire to ensure some loans, this is why you see all the guideline changes to ltv, mi premiums, down payment requirements and credit scores. But like anything else in life these same companies have competition so what RMIC cannot do AIG otherwise known as United Guaranty can. And what PMI does not touch anymore MGIC will do and the list goes on and on. The important thing to remember is that there are some MI companies still ensuring 100% loans as long as the borrower meets their guidelines.
Brought to you by Professional Mortgage Group, Inc.
Your Columbia Missouri Mortgage Broker
Tuesday, March 18, 2008
Today's Rate Cut and Setting Your Expectations!
As expected the FED cut the Federal Funds rate another .75% to 2.25%. Again this is the rate that banks and other institutions borrow money at. (not a rate that directly lowers mortgage rates)The cheaper it is for them, the more liquid they are. It is the FED's hope that this helps during this extremely trying time!
As usual the markets have bounced all over the place as a result of this news. Mortgage rates dropped a ton yesterday and then we have seen numerous re-prices for the worse today! This was expected, but it is extremely frustrating for us and to the public it just flat doesn't make sense! We hope things will settle down just a bit in the coming days, but the answer is we just don't know what will happen!
My advice to anyone getting a rate quote is this. Stay informed and make sure you are dealing with a lender who is experienced. You just can't afford to float your mortgage rate out there with someone who doesn't follow things closely. When you are quoted a rate, take it in stride. If you do not lock the rate at that time, it will change numerous times until you do. Most consumers don't realize this is happening and if the lender does his job, the end rate is what was quoted or better! Only in rare circumstance does the market go sour so fast that locks can't be made, causing your rate to increase form the quoted rate. This does happen from time to time. More often than not it is with a lender that doesn't follow the market and just waits for the rate sheet. However, it can even happen to the best of lenders.
With all this being said, just realize we are working for you. We want you to get the best rate too! This is why we study the market as intensely as we do. When we quote someone, we want it to mean something! We just want to point out that this volatile market "is what it is" and we all must deal with. If you are in the market for a mortgage, please set your expectations appropriately. Realize that the market is extremely volatile and don't get too greedy! We haven't seen more that 4 days of continuous declining rates in quite some time. Especially since the credit crunch hit! You need to have a very clear idea of the rate you want and what you risk tolerance is. Have that max rate in mind so your broker can lock and save you money if the market makes a sudden turn for the worse! If you maintain the correct frame of mind, you will no doubt come away pleased and end up with a quality rate!
Brought to you by:
Professional Mortgage Group, Inc.
"Your Columbia, MO Mortgage Broker"
As usual the markets have bounced all over the place as a result of this news. Mortgage rates dropped a ton yesterday and then we have seen numerous re-prices for the worse today! This was expected, but it is extremely frustrating for us and to the public it just flat doesn't make sense! We hope things will settle down just a bit in the coming days, but the answer is we just don't know what will happen!
My advice to anyone getting a rate quote is this. Stay informed and make sure you are dealing with a lender who is experienced. You just can't afford to float your mortgage rate out there with someone who doesn't follow things closely. When you are quoted a rate, take it in stride. If you do not lock the rate at that time, it will change numerous times until you do. Most consumers don't realize this is happening and if the lender does his job, the end rate is what was quoted or better! Only in rare circumstance does the market go sour so fast that locks can't be made, causing your rate to increase form the quoted rate. This does happen from time to time. More often than not it is with a lender that doesn't follow the market and just waits for the rate sheet. However, it can even happen to the best of lenders.
With all this being said, just realize we are working for you. We want you to get the best rate too! This is why we study the market as intensely as we do. When we quote someone, we want it to mean something! We just want to point out that this volatile market "is what it is" and we all must deal with. If you are in the market for a mortgage, please set your expectations appropriately. Realize that the market is extremely volatile and don't get too greedy! We haven't seen more that 4 days of continuous declining rates in quite some time. Especially since the credit crunch hit! You need to have a very clear idea of the rate you want and what you risk tolerance is. Have that max rate in mind so your broker can lock and save you money if the market makes a sudden turn for the worse! If you maintain the correct frame of mind, you will no doubt come away pleased and end up with a quality rate!
Brought to you by:
Professional Mortgage Group, Inc.
"Your Columbia, MO Mortgage Broker"
Monday, March 17, 2008
Monday Madness
The action happening on Wall Street, behind closed doors with The Fed, and the economy certainly isn't hurting mortgage rates, however with every piece of good news there is bad and the fact remains the economy is heading further into the tank!
In a desperate and awkwardly timed move the Fed cut its discount rate a .25% to 3.25% just 1 day ahead of their regularly scheduled meeting on Tuesday. This was an extremely weird and trying move as seen by most in both Washington and Wall Street. Perhaps the U.S. economy and in particular the U.S. Financial Sector is in much worse shape than most anticipated. This could be seen hitting home as Bear Stearns agreed to be bought out by JP Morgan Chase for just $236M! To explain to you how much of a discount this was rumors have been floating that Bear Stearns new headquarters was worth upwards of $1B. This move also required the help of the Fed and opening their money or "discount window" to Bear Stearns via JP Morgan Chase. Loans now made through the discount window are now due in 90 days instead of the traditional 30. They have also opened their "window" to unprecendented larger amount of banking institutions as a means of further hoping to help the "credit freeze" via trying to free up liquidity among the financial sectors and in particular large banking firms.
Will this move work? It might bode well for the larger institutions however lending guidelines for the "consumer level" residential mortgage purchases are becoming more and more strict. I've said this time and again what good do these moves do if the "consumer" cannot get financing for residential mortgages? Don't get me wrong before August 2007' we were on the extreme left end of financing but with that being said we have moved to the extreme right. Hopefully we will find a happy medium some where in the middle in the very near future.
Brought to you by Professional Mortgage Group, Inc.
You're Columbia Missouri Mortgage Broker
In a desperate and awkwardly timed move the Fed cut its discount rate a .25% to 3.25% just 1 day ahead of their regularly scheduled meeting on Tuesday. This was an extremely weird and trying move as seen by most in both Washington and Wall Street. Perhaps the U.S. economy and in particular the U.S. Financial Sector is in much worse shape than most anticipated. This could be seen hitting home as Bear Stearns agreed to be bought out by JP Morgan Chase for just $236M! To explain to you how much of a discount this was rumors have been floating that Bear Stearns new headquarters was worth upwards of $1B. This move also required the help of the Fed and opening their money or "discount window" to Bear Stearns via JP Morgan Chase. Loans now made through the discount window are now due in 90 days instead of the traditional 30. They have also opened their "window" to unprecendented larger amount of banking institutions as a means of further hoping to help the "credit freeze" via trying to free up liquidity among the financial sectors and in particular large banking firms.
Will this move work? It might bode well for the larger institutions however lending guidelines for the "consumer level" residential mortgage purchases are becoming more and more strict. I've said this time and again what good do these moves do if the "consumer" cannot get financing for residential mortgages? Don't get me wrong before August 2007' we were on the extreme left end of financing but with that being said we have moved to the extreme right. Hopefully we will find a happy medium some where in the middle in the very near future.
Brought to you by Professional Mortgage Group, Inc.
You're Columbia Missouri Mortgage Broker
Friday, March 14, 2008
Friday Frenzy!
What a day, consumer sentiment hit a 16 year low, inflation stalled in February (very good news for mortgage rates), and the S&P stated late Thursday evening that the sub-prime write downs were toward the end of there rope. Add on this up and what do you have? Another volatile day for both the Dow, MBS (Mortgage Backed Securities) and in turn mortgage rates.
Are we at the bottom? Some analysts seem to think we are very close while others believe we have a little way to go but can see light at the end of the tunnel. What does this mean for mortgage rates? The inflation numbers were a great sign for consumers, traders and the factors that influence rates. However, to some the inflation number was not a surprise as they see this simply as a culmination of less spending and a slowing economy. The Fed will almost certainly cut the Discount & Fed Funds Rate (keep in mind these cuts DO NOT affect mortgage rates) rather it's what these cuts do for the "macro-economic" economy that will determine where mortgage rates are headed. As I stated in earlier posts keep your hat on the ride is not over yet!
Brought to you by Professional Mortgage Group, Inc.
You're Columbia Missouri Mortgage Broker
Are we at the bottom? Some analysts seem to think we are very close while others believe we have a little way to go but can see light at the end of the tunnel. What does this mean for mortgage rates? The inflation numbers were a great sign for consumers, traders and the factors that influence rates. However, to some the inflation number was not a surprise as they see this simply as a culmination of less spending and a slowing economy. The Fed will almost certainly cut the Discount & Fed Funds Rate (keep in mind these cuts DO NOT affect mortgage rates) rather it's what these cuts do for the "macro-economic" economy that will determine where mortgage rates are headed. As I stated in earlier posts keep your hat on the ride is not over yet!
Brought to you by Professional Mortgage Group, Inc.
You're Columbia Missouri Mortgage Broker
Thursday, March 13, 2008
Retail Sales Plunge
The verdict is out; families are simply not spending their discretionary income! Retail sales plummeted to -.6% (that's right it's a negative); to show you how bad the outlook was on this the forecast was for a -.1% (that's right still a negative)! The market has already dropped almost 200 points and there seems to be strong momentum to support the downward spiral. Why is this statistic so important?
Retail sales account for approximately 1/3 of all GDP (Gross Domestic Product) so having this number be that bad really sets the stage for further declines and in turn stalled spending, credit borrowering, housing purchases and the like. To add to the problem the U.S. Dollar or otherwise known as "the greenback" is at a low against the Yen that has not been seen since 1995. Why is this so important? Simple, the value of "our" dollar is diminishing and at a fairly fast pace. This means that it will take more of our money to purchase the same goods we paid for yesterday. This also has spun negativity amongst foreign investors and in turn could translate into them pulling money out of the U.S. market all together.
Brought to you by Professional Mortgage Group, Inc.
You're Columbia Missouri Mortgage Broker
Retail sales account for approximately 1/3 of all GDP (Gross Domestic Product) so having this number be that bad really sets the stage for further declines and in turn stalled spending, credit borrowering, housing purchases and the like. To add to the problem the U.S. Dollar or otherwise known as "the greenback" is at a low against the Yen that has not been seen since 1995. Why is this so important? Simple, the value of "our" dollar is diminishing and at a fairly fast pace. This means that it will take more of our money to purchase the same goods we paid for yesterday. This also has spun negativity amongst foreign investors and in turn could translate into them pulling money out of the U.S. market all together.
Brought to you by Professional Mortgage Group, Inc.
You're Columbia Missouri Mortgage Broker
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