Weekly Rate & Market Update 4-15-16
Question of the week: We had a short sale several years ago, can we get a loan to buy a home?
Answer: Regular readers of the Weekly Rate & Market Update know the immediate answer this question: Yes. No. Maybe.
Fannie Mae and Freddie Mac have had a revision on their guidelines for how long after a short sale someone is eligible for a new mortgage. Prior to the revision there was a sliding scale, the more money you put down on your purchase, or equity you had in a refinance, the shorter period of time you needed to wait. Those guidelines have changed and the waiting period is the same for everyone regardless of the loan-to-value (LTV) of the applied for mortgage.
Here are the waiting time periods for different loan programs (see important notes below):
Fannie Mae & Freddie Mac (aka ‘conventional’): 4 years plus one day from date of sale of short sale.
FHA: 3 years plus one day from date of sale of short sale.
VA: 12 months plus one day from date of sale of short sale.
Jumbo*: Treated same as foreclosure, if it shows on your credit report then ineligible for new loan, typically short sales and foreclosures remain on report for 7 years from final reporting date to credit bureaus by lender impacted by short sale.
*We have one lender with one program that will all 3 day waiting period if, IF, there is a very compelling reason that can be provided as to why the short sale occurred—we will not start file until lender has signed off on the explanation.
It is very important to note that the waiting period impacts you on not only when you can be approved for a new mortgage but also when you can purchase a home. The purchase contract for your purchase must be dated either 3 or 4 years plus one day from the short sale close date, our loan application cannot be dated prior to the waiting period plus one day as well.
For example, you had a short sale on your previous home and we have a recorded deed that shows it closed on June 1, 2012. You wish to purchase a new home for $500,000 with 10% payment located at 1234 Main Street, Somewhere, CA.
You write an offer on June 1, 2016 and it is accepted—lender will reject.
You write an offer on June 2, 2016 and it is accepted—lender will accept.
Keep in mind that all other qualifying guidelines for credit, income, assets, etc for the loan program for which you are applying must also be met.
If you have had a short sale in your past before going out and writing an offer on a new home call me so we can make sure you are eligible for a new loan as well that you are qualified to purchase the property.
Remember, with Dennis it’s not just a mortgage, it’s your complete financial picture.
Data crunchers were busy this week as there were plenty of significant economic reports released that impact mortgage rates. Wednesday brought us retail sales for March, which dropped 0.3%, pulled down some by slow auto sales, but pushed up by higher gas prices. The number was disappointing and is mortgage rate friendly.
Of more importance to overall economy was the Producer Price Index for March. PPI fell 0.1% for the month. Expectations were for an increase of 0.3% following a 0.2% drop in February. The dropping PPI is reflecting global deflation/economic slowdown which is slowly bleeding into our economy. This is not great news for economic growth, as a result is good news for lower mortgage rates.
Consumer Prices are also showing weakness appearing in the economy. Following two months of 0.3% gains the CPI increased only 0.1% in March. Year over year prices grew 0.9%, which is down from 1.0% growth from February 2015 to 2016, this decrease in growth is worrisome. The news supports Fed Chair Yellen’s uncertainty on whether inflation will continue to increase through the year; and this puts into question future rate hikes by the Fed. The news is mortgage rate friendly.
Capping off our week of market moving data today’s industrial production report showed contraction for the second month in a row and a drop in capacity utilization. Declining industrial production has long term impacts on prices and employment. This number is mortgage market friendly.
Rates for Friday April 15, 2016: Despite all the rate friendly data we barely held onto last Friday’s rates as investors were moving out of Mortgage Backed Securities through the week to take profits. Rates did not fall mostly due to technical trading. If we can hold onto to current levels through early next week we may (may) see a dip by next Friday.
FIXED RATE MORTGAGES AT COST OF 1.25 POINTS
30 year conforming 3.375% Flat
30 year high-balance conforming 3.625% Flat
30 year FHA 3.25% *** Flat
30 year FHA high-balance 3.25% *** Flat
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. Rates are based on 20% down (3.5% for FHA) with 740 FICO score for purchase mortgages. ***FHA rates have no points and credit towards closing costs, recent rate change reduces credits
Vrroooom! Long Beach will be filled with sounds of race cars this weekend for all the races and events as part of the Toyota Grand Prix. In 1999 Leslie and I were in Amsterdam and got back to our hotel room pretty late and I turned on the television to see what was on and there was shot from the blimp of Long Beach in brilliant sunlight with the race in progress. We can forget how beautiful our city, region, state can be and how it is seen by outsiders.
If you are going bring your earplugs!
Have a great week,
Dennis
