Dennis' Mortgage Blog

Question of the week:  Last week you wrote about property requirements for FHA mortgages, is it harder to get approved for an FHA mortgage than a regular one?

Answer:  By “regular” I presume you mean a conventional mortgage.  After last week’s Question of the Week on property condition requirements for FHA mortgages that are more stringent than for conventional (Fannie Mae or Freddie Mac) mortgages I received a couple of inquiries like the one above.

It is not harder to get approved for an FHA mortgage as opposed to a conventional mortgage, and vice versa.  Most of the guidelines between FHA and conventional mortgages are pretty similar.  In many respects FHA mortgages are “easier” due to some of the guidelines that allow for non-occupant co-borrowers, higher loan to values and lower credit scores without impacting your mortgage rate or cost.

Within the guidelines FHA and conventional mortgages are very similar in that income must be fully verified; all funds must be fully verified, and often doubly verified to ensure all guidelines are met.   

An FHA mortgage is not harder to get approved for than a conventional mortgage, but it is not easier either.  While FHA may have stricter property requirements, property is just one part of the mortgage package, the other parts, income, assets, credit, are just as strict whether FHA or conventional.

Getting a mortgage these days is hard, but it is less hard if you are prepared with all your necessary documentation.

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This week’s blog postings:

No blog postings this week, between end of school activities and ceremonies and getting several “less hard” mortgages approved and closed the blog suffered this week despite several important economic events.  Here is a quick recap.

Economic news this week was not very good and should have caused rates to continue the slow descent they have been on since early April.  “Should” being the key word in that sentence.  Here is the list of data, reports, news that showed an economy that is unable to get moving in a positive growth direction: 

• Retail sales for May were negative from April
• Consumer Price Index showed inflation pretty much in check
• Business inventories shrank
• Industrial production dropped
• The Philadelphia Federal Reserve index of manufacturing in the region dropped to a three year low
• Jobless claims while down a bit from the prior week were over 400,000 for the tenth week in a row
• Consumer sentiment dropped, again

What in that litany of important economic news is good enough to warrant bond prices dropping and rates going up?  Nothing, but that is what has happened this week.

Mortgage Backed Securities traded in a very choppy pattern this week with no pattern and no real direction.  The main reaction stimulus appears to be Greece, again.  First there was potential resolution to their debt crisis, and rates move up, then there is no resolution and rates move down.  Today there may be resolution and rates have made up most of their bump for the week that started Monday, but not quite all of it.  As I write this (11:00 a.m. Pacific) rates are improving and if there is a rally in the afternoon we could see a small improvement.

Rates for Friday June 10, 2011: With rates moving basically sideways on another week of bad economic news I am concerned for a big correction possibly on the horizon.  If this is a minor correction and profit taking we should see rates continue on the path downward soon.  Don’t try to out think the market, lock your rate when you can, if the market improves we can possibly renegotiate to a lower rate before close of escrow.  “Should,” “Possibly” are key words, as always.  Rates up ever so slightly across all programs from last Friday.

FIXED RATE MORTGAGES AT COST OF 1.25 POINTS*

30 year conforming                               4.036%             Up 0.036%

30 year high-balance conforming           4.470%             Up 0.026%

30 year FHA                                         4.136%             Up 0.077%

30 year FHA jumbo                              4.220%             Up 0.045%

Please note that these are base rates and adjustments may be added for condominiums, refinances, credit scores, loan to value, no impound account and period rate is locked. 

* Please note that rates quoted are based on average of several lenders for a purchase transaction with 20% down payment with an impound account for taxes and insurance and a minimum FICO score of 740; APR is not quoted as it is dependent upon specific loan amounts, lenders and services selected.  Numbers provided are for comparative purposes only.

A little Alice Cooper soundtrack in the Smith house as “School Is Out For Summer.” (Yes you will have that in your head all day….you are welcome)  Oh to be ten again and waking up that first day of summer with forever in front of you before you have to go back to school.

Lessons from my Dad that I hope I am passing along to my children: Honesty and integrity always matter, better to make someone mad by being truthful than make them happy by being dishonest.  For every action there is a consequence, positive actions result in positive consequences.  Take the time to do it right the first time.  If you make Dad laugh a lot after dinner he will get the hiccups.

Happy Father’s Day Dad.

Have a great week,

Dennis