Rates climbed after the Fed announcement.

The announcement indicated some degree of improvement within the economay which caused investors to shy away from bond market (causes rate to rise). The statement also confirmed investors concerns about inflation.  The PPI and CPI inflation data released this week clearly reflected the impact of higher energy prices.

Week Ahead

Housing Starts will be released on Tuesday, Existing Home Sales will come out on Wednesday, and New Home Sales will be released on Friday. Jobless Claims and Leading Indicators are scheduled for Thursday.

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.

Rates do not reference any program and/or loan amount

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.

  Rural Housing- Must be in rural housing area.  100% financing based on appraised value.  Adjustable household income cannot exceed the maximum allowable income limits (currently suspended).

  All-in-One Construction –   one time close for both conforming and non-conforming

Other products available

ANY QUESTIONS REGARDING THIS INFORMATION PLEASE CONTACT:

Jim Hungerford at 971-226-8403

FHA requires Upfront Mortgage insurance (increased from 1% to 1.75%, typically financed into new loan) and annual mortgage insurance (monthly payment)

The table below shows the new effective annual premium rates by amortization term, base loan amount and LTV ratio.

 Assume a loan amount of $100,000.00 with a loan to value of 95% or more.

Check your approval!  The changes could impact your debt to income which would lower the amount you qualify for.

Now the Good News!  FHA Streamline Refinances will have reduced FHA Mortgage insurance if the loan being refinance was endorsed on or before May 31, 2009 effective on case numbers issued on or after June 11, 2012.

Please feel free to contact Jim Hungerford @ 971-226-8403 if you would like to get pre-approved for a residential home loan.

 Unfortunately mortgage rates/fees are dictated by the credit risk of the loan.  Statistically speaking construction loans are considered the highest risk for residential lending, therefore costs associated with the loan will be much higher than your non-construction loans. 

 All in one construction loans are typically .75 to 1% higher in interest rate when compared to conventional financing.   

1)      Conventional 30 year fix at 4.00% to 4.50%

2)      30 year all  in one Construction loans would be closer to 4.75% to 5.50%

You can click here to see how interest rates affect your monthly payment/cost of loan

 In addition to the higher interest rates, you will be charged an additional 1% to 2% discount fee (which is typical a percentage of the loan amount).  This does not include the typically closing costs and/or prepaid items that will be included in your loan.  Let’s assume your loan amount is $300,000 and closing costs/pre-paids to be roughly the same cost for all construction loans.  The discount fee alone is an additional out-of-pocket of $3,000.00 to $6000.00.

 Borrowers should consider low-cost construction loan (no discount fee) with a competitive interest rate (5/7/10 year arm).  This allows the borrower the flexibility to build the home for low out-of-pocket expense in both closing costs and monthly interest only payment s.  The borrower has the option to keep the remaining term of the construction loan or refinance into a new 30 year fix rate once the home is complete. 

 If borrowers elect to refinance into a new 30 year fix, then they will be taking advantage of the low conventional rates of .75% to 1% lower than the construction loan (depending on market conditions once home is completed).  It could save thousands of dollars over the life of the loan!  Yes it will require another set of closing costs, but remember you could save thousands on the construction loan, so when it all said and done the total out-of-pocket cash may be slightly higher, but the MONTHLY SAVINGS WILL FAR OUT WEIGH THE COST OF DOING TWO LOANS!

Please feel free to contact Jim Hungerford at 971-226-8403 to discuss.

The new law directs the Federal Housing Finance Agency to increase guarantee fees charged by Fannie Mae/Freddie Mac by no less than 10 basis points.  This means an additional cost to the borrower of  .375% to .5% of their loan amount.  In April FHA mortgage insurance will increase.

With a loan amount of $200,000, the new fee for obtaining conventional financing could cost the borrower $750.00 to $1000.00.  This could include any extension fees that are required to maintain a lock past its original close date (rates are typically locked for 30 days).

This weeks big event will be Tuesday’s Fed meeting.  Investors will be watching for hitns of additional stimulus.

Events Next Week:

Tues 12/13
Fed Meeting
Retail Sales
10-year Auction

Wed 12/14
30-yr Auction

Thur 12/15
PPI
Industrial Prod.

Fri 12/16
CPI

For WA, OR and CA, all counties max limit is $417,000.00.

The new fee structure for FY12 is as follows: 

• 2 percent upfront guarantee fee for purchase transactions;
• 1.5 percent upfront guarantee fee for refinance transactions; and
• 0.3 percent annual fee for both purchase and refinance transactions.

Additional information about Gauranteed Rurla Houisng.

Here is a recap of the updated HARP guidelines:

1)  Removing the 125% loan to value ceiling for fixed rate mortgages.

2)  If refinancing into an adjustable rate mortgage there is a 105% cap.

3)  Eliminating the appraisal where there is reliable AVM estimate available. Currently some Fannie Mae HARP refi’s have qualified to have appraisals waived, it appears this may become more of the norm with HARP refi’s.

4)  Eliminating certain risk-based fees for borrowers who refinance into shorter-term mortgages and reducing fees for other borrowers;

Extending the end date of HARP until December 31, 2013 for loan originally sold to Fannie or Freddie on or before May 31, 2009.

Last weeks fed announcement to boost the economy helped mortgage rates hit historic lows mid week.  This weeks New Home Sales will be released today, Durable orders will come out on Wednesday, Pending Home Sales on Thursday.  Friday could be a big day with Core PCE inflation, Personal income, Chicago PMI Manufacturing and Consumer Sentiment.