Positive News On Mortgage Lending
Since the middle of 2007 most of the news regarding the mortgage industry has been pretty bad. "Subprime" was a word not widely used by the public until recently-now it is on everyone's lips. As a result, many changes have come to pass both in regulation, guidelines, and more importantly, in the economy. And there is very positive news for homeowners that may not be making the headlines.
First, the interest rates on mortgage loans have recently declined to levels not seen since the "refi-boom" of 2002-03. Fixed rate mortgage loans are averaging in the mid- to upper 5% range. Traditional adjustable rate mortgages for larger loans are also in the mid-5% range. Many families are taking advantage of this drop in rates to refinance their ARM loans to a great low fixed rate. Others are seeing the combination of low rates and great housing values to make the home purchase they have put off. There may not be a better time to buy a home in the next decade. The home prices and low rates are like a solar eclipse-a very rare perfect alignment.
Second, just about all the really bad loan programs are gone. What remains are loans that use common-sense guidelines and require that the borrower can afford to make the payments. The subprime loans set borrowers up to fail. For the most part, the default rate on traditional owner-occupied loans using traditional guidelines is as low as it has in the past.
Lastly, regulation is making some positive differences for homeowners. In an effort to stimulate housing markets and give folks a chance to get into a better loan situation, the Federal Government is making changes in the rules that will improve what we the traditional lenders can offer. The FHA program will reduce the required down payment from 3% to 1.5% this spring. They will also raise the limit on homes that qualify for FHA financing from roughly $200,000 to $270,000 or possibly even higher. And finally the definition of "jumbo loans" that usually have higher rates than "conforming" loans, will be raised from $417,000 to $625,000. In Indiana, both of those loan amount changes are a tremendous opportunity because our housing stock is much more affordable than other parts of the country, so many more folks can get the best of the best products and rates.
Hopefully the good news from the mortgage lending industry will start to hit the media and raise the confidence of the 65% of families who own the homes they live in, and allow even more families to join them.
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