Just when we thought it was safe to go back into the water, there are mumblings of conforming loan guidelines being tightened AGAIN by Freddie Mac. Conforming loans were always our safe haven - well not anymore.
While I can understand the reasoning behind the guideline changes (higher loan limits) it is a new twist in an already difficult market. And it makes it more expensive to the borrower, that's what risk is all about.
If a borrower has a FICO below 740 and is looking for a loan over 80% (LTV) it will cost that borrower a minimum of 30 basis points or more. Remember when we thought borrowers with a 739 FICO had excellent credit? Still do but the higher LTV puts them in a higher risk category. That's all lenders see today RISK, RISK, RISK and they don't like it.
No more 100% financing in Freddie Mac, the market is just declining too rapidly and the homeowner will be underwater with no equity. 100% financing was always a high risk activity but it had found its place in a rapidly appreciating market.
An individual with a "fair credit" score is really going to find it tough. It will cost them an additional 175 to 300 basis points, with a lower LTV as well. With markets declining many lenders are drawing the line at 90% LTV. There's still FHA with its 3% down and those loan amounts are being raised as well.
Home equity loans are disappearing; many home owners will be receiving letters in the mail from their lenders notifying them that their home equity loan is being frozen (even if they are current). This simply means they will no longer be allowed to draw down on the line as its repaid.
In case you haven't read between the lines or need a hint at what I am trying to say I'll cut to the chase. If you have clients who are interested in refinancing or purchasing tell them to DO IT NOW. Yes the rates have gone up slightly but they are still better than they were a year ago. While I believe the Feds are more concerned about the economy slowing than Inflation at this point in time, things change rapidly and when it does those left behind on the sidelines will be paying for it - Dearly.
Work with a Certified Mortgage Specialist, they know the industry and can give you the guidance you need as a homeowner or home buyer. I love working with Realtors, let me be your new best friend as we bring the American Dream to life, homeownership for your clients. I make real estate transactions HAPPEN. Let me put your "financial house" in order through proper mortgaging.
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