Loans with down payments as low as 3 percent?
Potential homebuyers who don’t have a lot of cash to put down now have a cheaper way to get a loan.
Mortgage giants Fannie Mae and Freddie Mac announced guidelines Monday for loans with down payments as low as 3 percent under a new program largely aimed at first-time homebuyers.
“These underwriting guidelines provide a responsible approach to improving access to credit while ensuring safe and sound lending practices,” said Federal Housing Finance Agency Director Mel Watt in a release.
FHA has been providing a low down payment option but many prosperities may not meet the tougher FHA guidelines and there are loan limits and up front mortgage insurance that make that type of mortgage unattractive to some borrowers.
The loan must be fixed rate, and the home must be a borrower’s primary residence, so this would not apply to investors. At Fannie Mae, at least one of the borrowers on the loan must be a first-time homebuyer, defined as not having owned a home in the past three years. Freddie Mac is allowing the low down payment loan for any borrower who meets its underwriting standards.
Full documentation of a borrower’s income and credit history is required, as is mortgage insurance. Freddie Mac will require credit counseling for its borrowers, while Fannie Mae will in certain cases.
This obviously will provide more borrower’s with the ability to purchase a home. Contact me today and we can discuss the new guidelines.
What Happened to Rates Last Week:
Mortgage backed securities (MBS) gained +65 basis points (BPS) from last Friday’s close which caused 30 year fixed mortgage rates to move lower from the prior week. We had our best pricing on
Friday and our worst pricing on Wednesday.
The U.S. saw a great mix of low inflationary data and strong economic growth last week. The biggest report was the November Retail Sales which beat market expectations and surged 0.7%, plus October was revised upward. Wholesale Inventories was double the market expectations at 0.4% and Business Inventories matched estimates at 0.2%.
There was no sign of inflation as Import Prices dropped (-1.5%) and the Producer Price Index (PPI) also dropped (-0.2%) and we had a block-buster reading in the December Preliminary Consumer Sentiment Index which came in at 93.5, the best reading since July 2007.
The reason for the big spike in Consumer Sentiment? Oil. WTI Oil dropped to their lowest levels in five years which caused prices at the pump to fall as well as prices on millions of plastic and consumer products.
What to Watch Out For This Week:
|Date||Time (ET)||Economic Release||Actual||Market Expects||Prior|
|15-Dec||8:30 AM||Empire Manufacturing||–||14||10.2|
|15-Dec||9:15 AM||Industrial Production||–||0.70%||-0.10%|
|15-Dec||9:15 AM||Capacity Utilization||–||79.30%||78.90%|
|15-Dec||10:00 AM||NAHB Housing Market Index||–||58||58|
|15-Dec||4:00 PM||Net Long-Term TIC Flows||–||NA||$164.3B|
|16-Dec||8:30 AM||Housing Starts||–||1035K||1009K|
|16-Dec||8:30 AM||Building Permits||–||1060K||1080K|
|17-Dec||7:00 AM||MBA Mortgage Index||–||NA||7.30%|
|17-Dec||8:30 AM||Core CPI||–||0.10%||0.20%|
|17-Dec||8:30 AM||Current Account Balance||–||-$95.0B||-$98.5B|
|17-Dec||10:30 AM||Crude Inventories||–||NA||1.454M|
|17-Dec||2:00 PM||FOMC Rate Decision||–||0.25%||0.25%|
|18-Dec||8:30 AM||Initial Claims||–||292K||294K|
|18-Dec||8:30 AM||Continuing Claims||–||2510K||2514K|
|18-Dec||10:00 AM||Philadelphia Fed||–||26.5||40.8|
|18-Dec||10:00 AM||Leading Indicators||–||0.50%||0.90%|
|18-Dec||10:30 AM||Natural Gas Inventories||–||NA||-51 bcf
It is virtually impossible for you to keep track of what is going on with the economy and other events that can impact the housing and mortgage markets. Just leave it to me, I monitor the live trading of Mortgage Backed Securities which are the only thing government and conventional mortgage rates are based upon.The above are the major economic reports that will hit the market this week. They each have the ability to affect the pricing of Mortgage Backed Securities and therefore, interest rates for Government and Conventional mortgages. I will be watching these reports closely for you and let you know if there are any big surprises.