Recently, I was made aware of these huge financing changes that will affect a huge amount of our buyers in the future, please take the time to read the following....
I felt that it was important to communicate the BIG change coming in the first part of 2008. I didn't see any other posts on this, but as R.E. agents and consumers, you NEED to be aware of these changes as it will have an impact on would be homebuyers and those seeking to refinance.
Fannie Mae and Freddie Mac have announced a tightening in guidelines, with new Loan-Level Price Adjustments. In the first part of 2008, most borrowers who may have decent credit, but have FICO scores below 680, will now be required either to pay more points at closing or incur a higher interest rate.
I want to emphasize that these are NOT broker fees, these are required loan level pricing adjustment fees from Fannie and Freddie based on risk.
Basically what it boils down to is; if a client has a FICO above 680-no adjustments. But, if their FICO falls below 680 here is the breakdown:
Below 620 - 2% delivery fee
620-639 - 1.750% delivery fee
640-659 - 1.250% delivery fee
660-679 - 0.750% delivery fee
The amount a borrower could be forced to pay could be as much as 2% in points or a 1% higher interest rate than the current going rate. So, for example, if you have a buyer purchasing a $300,000 home, they could have to pay $6,000 just to get a normal market rate. This is BEFORE any other costs associated with the loan.
This is huge!
Now more than ever, clients need to make sure their credit scores are above 680. If they aren't, connect them with someone who can assist them in improving it (this does NOT have to be a credit repair company in some cases).
More importantly, if you know someone who is sitting on the fence regarding purchasing or refinancing, now is the time to share this information on the changes with them. In addition, at the beginning of this week, rates for 30 yr fixed loans were at their lowest in 25 months. People need to act now to take advantage of these lower rates before the market changes and the guideline changes come in 2008.
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