Mortgage Market News
In his semi-annual testimony to Congress, Fed Chief Bernanke described the economic outlook as “unusually uncertain”. According to Bernanke, this is the worst labor market since the Great Depression, and it is recovering more slowly than expected. Still, the Fed forecasts modest economic growth in 2010 with low inflation. Important for mortgage rates, Bernanke expressed reluctance to provide further monetary stimulus, unless the economy falters badly. He suggested that the upside of additional Fed actions may be limited, while the downside is that it would raise future inflation expectations.
This weeks economic calender consists of new homes sales on 7.26, Durable Orders and Beige Book on 7.28, and GDP (most important data) as well as Chicago PMI on 7.30.
Conforming Limits:
1 unit $417,000; 2 unit $533,850; 3 unit $645,300; 4 unit $801950
These rates do not reference a specific loan program; rather, they reflect general market conditions, which are subject to change at any time.
Credit risk pricing and how it impacts your interest rate/discount points (cost to buy rate down):
- Rates change daily – Mortgage loan interest rates and discount points are driven by the prices of Mortgage Backed Securities.
- Credit (fico) Scores – Lenders look at your mid credit score (typically 3 credit bureaus) to determine you credit risk. A+ credit would be 740 and above. From there they are categorized in 20 point increments (720-739, 700-719, 680-699, 660-679, 640-659, 620-640, no fico)
- Loan to value – Typically the lower the loan to value (LTV), the lower the risk. Loan to values of 60% or less are considered the lowest risk
- Transaction type – The risk level from low to high – Purchase, rate and term refinance, and cash-out refinance.
- Transaction type continued – The risk level from the low to high – Primary residence, second home and investment property
- Property type – Single family residence, PUD, condo then 2-4 unit properties.
- Escrow account – If your LTV is 80% or lower, then you have the option to waive escrows (taxes and insurance included in monthly payment), but it can affect your discount points.
| TERM | Rate Range |
| Conforming 30 Year Fix | Mid 4 – High 4 |
| Conforming 15 Year Fix | High 3 – Low 4 |
| Conforming 3/1 Arm | Mid 3 – Low 4 |
| Conforming 7/1 Arm | Mid 3 – High 3 |
| Non-Conforming 30 Year Fix | Low 5 – High 5 |
| Non-Conforming 15 Year Fix | High 4 – Low 5 |
| Non-Conforming 5/1 Arm | Mid 4 – High 4 |
| FHA 30 year fix | Mid 4 – Low 5 |
| FHA 5/1 Arm | Mid 3 to High 3 |
| VA 30 Year Fix | Mid 4 to High 4 |
| Rural Dev 30 year fix | High 4 – Low 5 |
THERE ARE NUMEROUS LOAN PRODUCTS AVAILABLE:
Conforming – Loans designed for primary, second and investment properties. There are restrictions in regards to loan amount (SFR is typically 417,000, but in some areas it may be higher).
Non-Conforming – . Typical loan amounts above 417,000.00.
FHA- 30 year amortized loan. 3.5% down required by the borrower (can be gifted by an acceptable source).
VA- Guaranteed by the federal government based on the amount of entitlement to the veteran in conjunction with the loan amount.
