Dennis' Mortgage Blog

Covered in this communication:

1)    New loan limits “black hole”

2)    4.5% interest rate?

3)    Rates at all time low

Question of the week:  I am being bombarded by calls from people who will get my property tax lowered, should I pay them?   Answer:  Not unless you pay someone to change light bulbs for you.  If you feel your current value is lower than your assess value you can visit the website of your County Assessor and see what the requirements are for your county to lower your assessed value and property taxes.  The LA County Assessor has said they his office is automatically reviewing the assessments of properties throughout the county that were purchased in 2005-2007; it this means you I would still go on-line and check the process and forms to complete.

If you have a question you would like me to answer send it to me!

New Loan Limits have us in limbo.  Some lenders are quoting prices and some are not on loans above $417,000.  While I have provided a quote below at this time unless a loan is in documents and ready to fund anything over $417,000 is probably not funding for a couple of weeks at the earliest according to our lenders.  If this status changes I will let you know.

“Dennis how can I get a 4.5% rate?”  Earlier this week the Treasury announced it is considering a proposal to drop mortgage rates to 4.5% for home buyers.   I think the proposal is idiotic but I will not delve into that this week, instead I will comment on the what is happening: nothing.  At this point it is a proposal that has effectively frozen the market in the short term as borrowers and buyers wait to see if they can score the lowest 30 year fixed rate on record.  By waiting borrowers may miss out on historic lows that occurred this week and should continue next week without any intervention from the Federal Government to artificially lower interest rates.  This morning following solid gains yesterday we were able to lock in 30 year fixed rate conforming purchase mortgages at 5.00% until about 10:00 when the market started tanking and rates shot up to close at 5.125% on the day.  Clients waiting for the 4.5% are at risk of waiting for something that may not arrive and miss out on what is already here:  historically low interest rates.

Our biggest issue in the market today is equity and property values.  If the government wants to have a significant impact on shoring up housing markets they should work with Fannie/Freddie and the mortgage insurance companies to offer tiered loan-to-values based on credit scores and debt-to-income ratios.  The higher your score and lower your DTI the higher loan to value they will insure.  That would help ease many homeowners payment situations and also open up the market to families with solid credit and income but lacking down payment ability.

Rates at all time low.  As I just mentioned this week we broke below the 50 year low of 5.375% recorded in 2003 and for the first time kissed just below 5.00% with a bit higher fee (1.45 points on Thursday afternoon).  Now is an incredible opportunity for those thinking about purchasing a home, prices are at two and three year lows in most markets and rates are at historic lows.  Sure they may drop lower, rates and prices, but at some point the market firms up and buyers start to exceed sellers, when that happens both go up.  As an example look at the chart below, buyers who wanted to wait for lower rates on conforming-jumbo loans in mid-September waiting for lower rates missed the boat, especially if their loan amount is over the new $625,000 that is coming. 

If you can afford the home and you like the home buy the home.  That is the advice I have given for two decades and there are hundreds of families who are glad they listened.  We do not know what the future holds, but we do know what today is offering us so take advantage of the market conditions today for you and your family.

Bank owned not a bargain  Lately I have seen several advertisements from agents implying that the bank owned properties they have listed are a bargain, from the inventory we have had go through the past several months I can say they are not a bargain.  While not a bargain the bank REOs (Real Estate Owned) are not bad deals necessarily, but neither are they the best (i.e. lowest) price or value on the market.  Banks have gotten a lot smarter than they were fifteen to twenty years ago at pricing and marketing their REOs with local real estate professionals.  From our experience if you have two identical properties, one bank owned and one privately owned the smoother transaction will be with the latter.  As a buyer, ignore who the owner is and focus on the price, the property condition, location, layout, etc. 

Weird week on the rates as we do not really have price on loans over $417,000; numbers below are for relative comparison and where the “new” conforming-jumbos should fall when pricing hits and FHA moved up while conforming moved down.  This is due to the announcement of the Fed getting involved in mortgage backed securities in the Fannie/Freddie markets, plus the Treasury proposal to force interest rates down—all the investing went to conforming securities in anticipation of higher prices in the future and FHA suffered as a result.

NOTE PRICING BELOW IS BASED ON 20% DOWN FOR CONFORMING, 3% FOR FHA, FULL DOC, AND FICOS OF 740 AND ABOVE (change from last Friday):

30 year conventional at 1 point 5.125%               ê 0.25%

30 year conforming-jumbo at 1 point 5.625%               ó 0.25%***

30 year FHA at 1 point 5.5%                                       é 0.25%

Have a great weekend, while running all over this weekend I am available to help you put together any transactions so please call if I can help you!

Dennis

Remember this update is posted weekly on My Blog at www.DennisCSmith.com , feel free to forward the link to family and friends who may be interested in past commentaries.