Housing affordability is increasing — here’s where it’s up the most

Reports show improving affordability

Homebuyers are enjoying increased affordability — at least according to two new reports released last week. Affordability is up most notably in some of the nation’s higher-priced markets, including many along the West Coast.

Verify your new rate (Feb 28th, 2021)

Housing is more affordable than buyers think

According to the latest Housing and Mortgage Market Review released by Arch MI, “housing isn’t as expensive as you think.”

“Housing affordability is actually better now than its historic norms in most states and remains far better than the worst point for each state since 1990,” explains Ralph DeFranco, Arch MI’s global chief economist. “This may be surprising because we tend to focus on home prices rather than affordability. Affordability accounts for the offsetting factors of low interest rates and a 28% increase in median household income since 2012.”

Analysis in the HaMMR shows the majority of U.S. states require homebuyers to spend less than the recommended 30% of their monthly income on housing costs. In states like Arkansas, Iowa, Oklahoma, and West Virginia, it’s less than 20% — the all-time most affordable level for most of them.

Affordable housing: These cities take the smallest salaries to buy a house

Top cities for affordability

But housing affordability hasn’t just improved in the long run. According to a second report from title insurance firm First American, there’s also been serious movement over the last year.

Buying a house in 2020? Here’s who you’re up against

The improvements were biggest in three cities in California: San Jose, Riverside, and San Francisco. It also became considerably more affordable to buy a house in Baltimore and Denver as well.

House-buying power jumped 22% in Baltimore and 21% in Riverside. It also improved in Los Angeles, Portland, Dallas, Boston, and Washington D.C. Overall affordability improved in all 44 markets tracked by First American.

Verify your new rate (Feb 28th, 2021)

Get today’s mortgage rates

Are you looking to buy a house in today’s affordable housing market? Then shop around and see what mortgage rates you qualify for today.

Verify your new rate (Feb 28th, 2021)

Source: themortgagereports.com

Mortgage and refinance rates today, February 17, 2021

Today’s mortgage and refinance rates 

Average mortgage rates rose appreciably yesterday, as we predicted. They’re still below 3% for 30-year fixed-rate mortgages. But it’s been a while since they’ve been so high.

And early signs suggest mortgage rates may inch higher again today or perhaps hold steady. Rises first thing were moderating by 10 a.m. (ET) so forecasting is more difficult than it was yesterday. This morning’s retail sales figures for January were way better than expected. And that was fueling optimism in markets earlier.

Find and lock a low rate (Feb 18th, 2021)

Current mortgage and refinance rates 

Program Mortgage Rate APR* Change
Conventional 30 year fixed 2.937% 2.939% +0.13%
Conventional 15 year fixed 2.488% 2.497% +0.01%
Conventional 20 year fixed 2.976% 2.983% +0.13%
Conventional 10 year fixed 2.51% 2.531% +0.02%
30 year fixed FHA 2.697% 3.373% +0.13%
15 year fixed FHA 2.479% 3.061% +0.01%
5 year ARM FHA 2.501% 3.207% Unchanged
30 year fixed VA 2.25% 2.421% +0.12%
15 year fixed VA 2.125% 2.445% +0.13%
5 year ARM VA 2.5% 2.386% Unchanged
Rates are provided by our partner network, and may not reflect the market. Your rate might be different. Click here for a personalized rate quote. See our rate assumptions here.

Find and lock a low rate (Feb 18th, 2021)


COVID-19 mortgage updates: Mortgage lenders are changing rates and rules due to COVID-19. To see the latest on how coronavirus could impact your home loan, click here.

Should you lock a mortgage rate today?

Over the 11 working days so far this month, mortgage rates have fallen on only three, based on data from Mortgage News Daily. And those rates are now considerably higher than they were on Feb. 1.

Still, it’s much too soon to think of these movements as an upward trend. It might be the start of one. But it would be no surprise if they fell back to some extent in coming hours, days or weeks.

The question is: Is it worth taking a chance on that? Most mortgage rates are today still below 3%. So they remain in uberlow territory. And locking now would involve a relatively small financial hit compared with earlier in the month.

Personally, I’m still cautious. And my personal rate lock recommendations remain:

  • LOCK if closing in 7 days
  • LOCK if closing in 15 days
  • LOCK if closing in 30 days
  • FLOAT if closing in 45 days
  • FLOAT if closing in 60 days

But, with so much uncertainty at the moment, your instincts could easily turn out to be as good as mine — or better. So be guided by your gut and your personal tolerance for risk.

Compare top lenders

Market data affecting today’s mortgage rates 

Here’s a snapshot of the state of play this morning at about 9:50 a.m. (ET). The data, compared with about the same time yesterday, were:

  • The yield on 10-year Treasurys climbed to 1.29% from 1.26%. (Bad for mortgage rates) More than any other market, mortgage rates normally tend to follow these particular Treasury bond yields, though less so recently
  • Major stock indexes were lower on opening. (Good for mortgage rates.) When investors are buying shares they’re often selling bonds, which pushes prices of those down and increases yields and mortgage rates. The opposite happens when indexes are lower
  • Oil prices eased back to $59.88 from $59.93 a barrel. (Neutral for mortgage rates* because energy prices play a large role in creating inflation and also point to future economic activity.) 
  • Gold prices edged lower to $1,783 from $1,792 an ounce. (Neutral for mortgage rates*.) In general, it’s better for rates when gold rises, and worse when gold falls. Gold tends to rise when investors worry about the economy. And worried investors tend to push rates lower
  • CNN Business Fear & Greed index — Fell to 62 from 70 out of 100. (Good for mortgage rates.) “Greedy” investors push bond prices down (and interest rates up) as they leave the bond market and move into stocks, while “fearful” investors do the opposite. So lower readings are better than higher ones

*A change of less than $20 on gold prices or 40 cents on oil ones is a fraction of 1%. So we only count meaningful differences as good or bad for mortgage rates.

Caveats about markets and rates

Before the pandemic and the Federal Reserve’s interventions in the mortgage market, you could look at the above figures and make a pretty good guess about what would happen to mortgage rates that day. But that’s no longer the case. The Fed is now a huge player and some days can overwhelm investor sentiment.

So use markets only as a rough guide. Because they have to be exceptionally strong (rates are likely to rise) or weak (they could fall) to rely on them. But, with that caveat, so far mortgage rates today look likely to rise a little or hold steady.

Find and lock a low rate (Feb 18th, 2021)

Important notes on today’s mortgage rates

Here are some things you need to know:

  1. The Fed’s ongoing interventions in the mortgage market (way over $1 trillion) should put continuing downward pressure on these rates. But it can’t work miracles all the time. And read “For once, the Fed DOES affect mortgage rates. Here’s why” if you want to understand this aspect of what’s happening
  2. Typically, mortgage rates go up when the economy’s doing well and down when it’s in trouble. But there are exceptions. Read How mortgage rates are determined and why you should care
  3. Only “top-tier” borrowers (with stellar credit scores, big down payments and very healthy finances) get the ultralow mortgage rates you’ll see advertised
  4. Lenders vary. Yours may or may not follow the crowd when it comes to daily rate movements — though they all usually follow the wider trend over time
  5. When rate changes are small, some lenders will adjust closing costs and leave their rate cards the same
  6. Refinance rates are typically close to those for purchases. But some types of refinances are higher following a regulatory change

So there’s a lot going on here. And nobody can claim to know with certainty what’s going to happen to mortgage rates in coming hours, days, weeks or months.

Are mortgage and refinance rates rising or falling?

Today and soon

I’m expecting mortgage rates to nudge up or hold steady today. But, as always, that could change as the day progresses.

This morning’s retail sales figures for January looked likely to keep investors in a buoyant mood. Economists had forecast a rise of 1.2% but the actual one was 5.3%. However, by our publication time, some of that mood seemed to be turning.

But perhaps that shouldn’t be a surprise. Yesterday’s level of positivity rarely lasts long. And, however things work out today, the chances of some negative news stories that pull mortgage rates lower are good. The questions are: When will they come? And will they be enough to reverse recent rises in those rates?

For more background on my wider thinking, read our latest weekend edition, which is published every Saturday soon after 10 a.m. (ET).

Recently

Over the last several months, the overall trend for mortgage rates has clearly been downward. And a new, weekly all-time low was set on 16 occasions last year, according to Freddie Mac.

The most recent such weekly record occurred on Jan. 7, when it stood at 2.65% for 30-year fixed-rate mortgages. But rates then rose, though only modestly. And in Freddie’s Feb. 11 report that weekly average was 2.73% — the same as the previous week and the one before that.

Expert mortgage rate forecasts

Looking further ahead, Fannie Mae, Freddie Mac and the Mortgage Bankers Association (MBA) each has a team of economists dedicated to monitoring and forecasting what will happen to the economy, the housing sector and mortgage rates.

And here are their current rates forecasts for each quarter of 2021 (Q1/21, Q2/21, Q3/21 and Q4/21).

The numbers in the table below are for 30-year, fixed-rate mortgages. And they were all published between Jan. 14 and 20:

Forecaster Q1/21 Q2/21 Q3/21 Q4/21
Fannie Mae 2.7% 2.7% 2.8% 2.8%
Freddie Mac 2.9% 2.9% 3.0% 3.0%
MBA 2.9% 3.1% 3.3% 3.4%

But, given so many unknowables, the current crop of forecasts may be even more speculative than usual. And there’s certainly a widening spread as the year progresses.

Find your lowest rate today

Some lenders have been spooked by the pandemic. And they’re restricting their offerings to just the most vanilla-flavored mortgages and refinances.

But others remain brave. And you can still probably find the cash-out refinance, investment mortgage or jumbo loan you want. You just have to shop around more widely.

But, of course, you should be comparison shopping widely, no matter what sort of mortgage you want. As federal regulator the Consumer Financial Protection Bureau says:

Shopping around for your mortgage has the potential to lead to real savings. It may not sound like much, but saving even a quarter of a point in interest on your mortgage saves you thousands of dollars over the life of your loan.

Verify your new rate (Feb 18th, 2021)

Compare top lenders

Mortgage rate methodology

The Mortgage Reports receives rates based on selected criteria from multiple lending partners each day. We arrive at an average rate and APR for each loan type to display in our chart. Because we average an array of rates, it gives you a better idea of what you might find in the marketplace. Furthermore, we average rates for the same loan types. For example, FHA fixed with FHA fixed. The end result is a good snapshot of daily rates and how they change over time.

Source: themortgagereports.com

The Fair Housing Act now applies to LGBTQ renters and home buyers. Here’s what changed

HUD is expanding the Fair Housing Act

Trans and other members of the LGBTQ community are now protected under the Fair Housing Act, according to an announcement from the Department of Housing and Urban Development late last week.

The agency will now investigate complaints of housing discrimination relating to sexual orientation and gender identity — two classes not previously protected under the law. 

This is a critical change; HUD has recognized the history of housing discrimination against LGBTQ individuals and is offering legal protection to those affected for the first time.

Verify your home buying eligibility (Feb 16th, 2021)

LGBTQ housing discrimination: An “urgent” issue

“Housing discrimination on the basis of sexual orientation and gender identity demands urgent enforcement action,” said Jeanine M. Worden, the acting assistant secretary of HUD’s Fair Housing office.

“That is why HUD, under the Biden Administration, will fully enforce the Fair Housing Act to prohibit discrimination on the basis of gender identity or sexual orientation.”

Worden continues, “Every person should be able to secure a roof over their head free from discrimination, and the action we are taking today will move us closer to that goal.”

This change is in line with the Biden Administration’s goals to reduce discrimination in housing, and to make renting and home buying more accessible and affordable.

What are Fair Housing protections?

The Fair Housing Act — technically Title VIII of the Civil Rights Act of 1968 — protects Americans from discrimination when:

  • Renting or buying a property
  • Applying for a mortgage
  • Seeking housing assistance
  • Participating in any other housing-related activity

Seven classes are explicitly protected in the Act, including race, color, national origin, religion, familial status, disability and sex. 

Prior to HUD’s latest announcement, “sex” had meant biological sex.

Now, under the new expansions, the Fair Housing Act also protects against discrimination based on gender identity and sexual orientation as well.

How this change helps LGBTQ renters and homebuyers

Thanks to the changes, LGBTQ Americans can now file complaints with HUD if they feel they’re discriminated against at any point while seeking housing.

This could include discrimination by a real estate agent, mortgage professional, rental property owner, apartment manager, or anyone else involved in the housing process.

HUD offers two examples of what LGBTQ housing discrimination might look like:

  • “A transgender woman is asked by the owner of her apartment building not to dress in women’s clothing in the common areas of the property.”
  • “A gay man is evicted because his landlord believes he will infect other tenants with HIV/AIDS.”

If you’ve experienced these or any other types of housing discrimination because of your gender identity or sexual orientation, file a complaint at HUD.gov/FairHousing.

Complaints dating back to January 20, 2020, will be investigated.

Why the Fair Housing Act is being expanded

There are three reasons HUD has expanded Fair Housing protections to trans and other LTBTQ Americans.

First, there’s President Biden’s Day 1 executive order, which calls on government agencies to “prevent and combat discrimination on the basis of gender identity or sexual orientation.”

According to agency spokespeople, HUD is the first department to comply with this executive order.

A new interpretation of the law

The recent Supreme Court case Bostock v. Clayton County also plays a role. In the 2019 case, the court found that a transgender worker’s firing was a direct violation of the Title VII of the Civil Rights Act and that “sex” protections did indeed apply. 

“Homosexuality and transgender status are inextricably bound up with sex,” Justice Neil Gorsuch wrote.

“Not because homosexuality or transgender status are related to sex in some vague sense or because discrimination on these bases has some disparate impact on one sex or another, but because to discriminate on these grounds requires an employer to intentionally treat individual employees differently because of their sex.”

According to HUD, the ruling clarified how the Civil Rights Act — including its Fair Housing provisions — should be interpreted moving forward.

“Enforcing the Fair Housing Act to combat housing discrimination based on sexual orientation and gender identity isn’t just the right thing to do-it’s the correct reading of the law after Bostock,” said Damon Y. Smith, HUD’s principal deputy general counsel.

“We are simply saying that the same discrimination that the Supreme Court has said is illegal in the workplace is also illegal in the housing market.”

A history of housing discrimination

HUD also cited numerous studies surrounding housing discrimination and the LGBTQ community in its decision to expand Fair Housing protections.

One study, for example, found that same-sex male couples were significantly less likely to receive responses when seeking a rental property. Another found discrimination against transgender women in homeless shelters.

With the expansion of the Fair Housing Act, there’s now a legal path to recourse for individuals who have been barred from housing or discriminated against in this manner.

Source: themortgagereports.com

Mortgage and refinance rates today, February 11, 2021

Today’s mortgage and refinance rates 

Average mortgage rates nudged lower again yesterday. And, as Freddie Mac and Mortgage News Daily point out, they’re now pretty much back to where they were a week ago.

Once again, mortgage rates today probably won’t move far. Overnight, they had appeared likely to fall, following pessimistic remarks on employment from Federal Reserve Chair Jerome Powell. But they stabilized earlier when weekly jobless figures turned out OK.

Find and lock a low rate (Feb 13th, 2021)

Current mortgage and refinance rates 

Program Mortgage Rate APR* Change
Conventional 30 year fixed 2.745% 2.745% -0.05%
Conventional 15 year fixed 2.308% 2.308% Unchanged
Conventional 5 year ARM 3% 2.743% Unchanged
30 year fixed FHA 2.438% 3.415% Unchanged
15 year fixed FHA 2.25% 3.191% -0.06%
5 year ARM FHA 2.5% 3.207% +0.01%
30 year fixed VA 2.308% 2.479% Unchanged
15 year fixed VA 2.063% 2.382% Unchanged
5 year ARM VA 2.5% 2.379% Unchanged
Rates are provided by our partner network, and may not reflect the market. Your rate might be different. Click here for a personalized rate quote. See our rate assumptions here.

Find and lock a low rate (Feb 13th, 2021)


COVID-19 mortgage updates: Mortgage lenders are changing rates and rules due to COVID-19. To see the latest on how coronavirus could impact your home loan, click here.

Should you lock a mortgage rate today?

A little lower down in this article, we calculate how much you could have saved by locking at the lowest mortgage rate so far this year compared to the highest. Spoiler alert: On a $200,000 loan, it’s $15 a month.

The point of that exercise was to illustrate that we’re not talking life-changing sums here. Of course, everyone would like to lock at a record low. But all rates recently have been so close to the all-time low that we’re looking at insignificant differences.

I suspect rates may remain within this uberlow range for some time to come. But there’s always a risk of sudden and sharp movements. So my question is: Is it worth the stress of continuing to float when so little is apparently at stake?

My own view is that it isn’t. So my personal rate lock recommendations are:

  • LOCK if closing in 7 days
  • LOCK if closing in 15 days
  • LOCK if closing in 30 days
  • FLOAT if closing in 45 days
  • FLOAT if closing in 60 days

But, with so much uncertainty at the moment, your instincts could easily turn out to be as good as mine — or better. So be guided by your gut and your personal tolerance for risk.

Compare top lenders

Market data affecting today’s mortgage rates 

Here’s a snapshot of the state of play this morning at about 9:50 a.m. (ET). The data, compared with about the same time yesterday morning, were:

  • The yield on 10-year Treasurys inched higher to 1.15% from 1.14%. (Bad for mortgage rates) More than any other market, mortgage rates normally tend to follow these particular Treasury bond yields, though less so recently
  • Major stock indexes were higher on opening. (Bad for mortgage rates.) When investors are buying shares they’re often selling bonds, which pushes prices of those down and increases yields and mortgage rates. The opposite happens when indexes are lower
  • Oil prices rose to $58.67 from $58.47 a barrel. (Neutral for mortgage rates* because energy prices play a large role in creating inflation and also point to future economic activity.) 
  • Gold prices edged lower to $1,843 from $1,848 an ounce. (Neutral for mortgage rates*.) In general, it’s better for rates when gold rises, and worse when gold falls. Gold tends to rise when investors worry about the economy. And worried investors tend to push rates lower
  • CNN Business Fear & Greed index — Inched down to 66 from 67 out of 100. (Good for mortgage rates.) “Greedy” investors push bond prices down (and interest rates up) as they leave the bond market and move into stocks, while “fearful” investors do the opposite. So lower readings are better than higher ones

*A change of less than $20 on gold prices or 40 cents on oil ones is a fraction of 1%. So we only count meaningful differences as good or bad for mortgage rates.

Caveats about markets and rates

Before the pandemic and the Federal Reserve’s interventions in the mortgage market, you could look at the above figures and make a pretty good guess about what would happen to mortgage rates that day. But that’s no longer the case. The Fed is now a huge player and some days can overwhelm investor sentiment.

So use markets only as a rough guide. Because they have to be exceptionally strong (rates are likely to rise) or weak (they could fall) to rely on them. But, with that caveat, so far mortgage rates today look likely to hardly move if they do so at all.

Find and lock a low rate (Feb 13th, 2021)

Important notes on today’s mortgage rates

Here are some things you need to know:

  1. The Fed’s ongoing interventions in the mortgage market (way over $1 trillion) should put continuing downward pressure on these rates. But it can’t work miracles all the time. And read “For once, the Fed DOES affect mortgage rates. Here’s why” if you want to understand this aspect of what’s happening
  2. Typically, mortgage rates go up when the economy’s doing well and down when it’s in trouble. But there are exceptions. Read How mortgage rates are determined and why you should care
  3. Only “top-tier” borrowers (with stellar credit scores, big down payments and very healthy finances) get the ultralow mortgage rates you’ll see advertised
  4. Lenders vary. Yours may or may not follow the crowd when it comes to daily rate movements — though they all usually follow the wider trend over time
  5. When rate changes are small, some lenders will adjust closing costs and leave their rate cards the same
  6. Refinance rates are typically close to those for purchases. But some types of refinances are higher following a regulatory change

So there’s a lot going on here. And nobody can claim to know with certainty what’s going to happen to mortgage rates in coming hours, days, weeks or months.

Are mortgage and refinance rates rising or falling?

Today and soon

I’m expecting mortgage rates to hold steady or thereabouts today. But, as always, that could change as the day progresses.

We mention above how small a difference floating or locking makes while mortgage rates remain within their current tight range. We used a mortgage calculator to compare monthly payments on the same $200,000 loan at Freddie Mac’s highest weekly average in 2021 (2.79%) and at its lowest (2.65% — an all-time low), And the high payment was $821 while the low was $806.

Now, $15 is $15. And, over the term of a mortgage, it adds up. But it’s not the sort of sum that you should be stressing out over.

I’m expecting mortgage rates to rise more significantly once the pandemic recedes and the economy returns to something like normalcy. And that may happen later this year. But, for now, it’s looking unlikely we’ll see any sharp movements anytime soon.

For more background on my wider thinking, read our latest weekend edition, which is published every Saturday soon after 10 a.m. (ET).

Recently

Over the last several months, the overall trend for mortgage rates has clearly been downward. And a new, weekly all-time low was set on 16 occasions last year, according to Freddie Mac.

The most recent such weekly record occurred on Jan. 7, when it stood at 2.65% for 30-year fixed-rate mortgages. But rates then rose, though only modestly. And in Freddie’s Feb. 11 report (today), that weekly average was 2.73% — the same as last week.

Expert mortgage rate forecasts

Looking further ahead, Fannie Mae, Freddie Mac and the Mortgage Bankers Association (MBA) each has a team of economists dedicated to monitoring and forecasting what will happen to the economy, the housing sector and mortgage rates.

And here are their current rates forecasts for each quarter of 2021 (Q1/21, Q2/21, Q3/21 and Q4/21).

The numbers in the table below are for 30-year, fixed-rate mortgages. And they were all published between Jan. 14 and 20:

Forecaster Q1/21 Q2/21 Q3/21 Q4/21
Fannie Mae 2.7% 2.7% 2.8% 2.8%
Freddie Mac 2.9% 2.9% 3.0% 3.0%
MBA 2.9% 3.1% 3.3% 3.4%

But, given so many unknowables, the current crop of forecasts may be even more speculative than usual. And there’s certainly a widening spread as the year progresses.

Find your lowest rate today

Some lenders have been spooked by the pandemic. And they’re restricting their offerings to just the most vanilla-flavored mortgages and refinances.

But others remain brave. And you can still probably find the cash-out refinance, investment mortgage or jumbo loan you want. You just have to shop around more widely.

But, of course, you should be comparison shopping widely, no matter what sort of mortgage you want. As federal regulator the Consumer Financial Protection Bureau says:

Shopping around for your mortgage has the potential to lead to real savings. It may not sound like much, but saving even a quarter of a point in interest on your mortgage saves you thousands of dollars over the life of your loan.

Verify your new rate (Feb 13th, 2021)

Compare top lenders

Mortgage rate methodology

The Mortgage Reports receives rates based on selected criteria from multiple lending partners each day. We arrive at an average rate and APR for each loan type to display in our chart. Because we average an array of rates, it gives you a better idea of what you might find in the marketplace. Furthermore, we average rates for the same loan types. For example, FHA fixed with FHA fixed. The end result is a good snapshot of daily rates and how they change over time.

Source: themortgagereports.com

Biden administration could reduce FHA mortgage insurance premiums. Here’s what it means for you

FHA mortgage insurance might get cheaper this year

“Mortgage industry abuzz with speculation of FHA MIP cut,” stated one trade magazine on January 28. And that journalist was right.

Many insiders are confidently predicting a big cut in the Federal Housing Administration’s (FHA’s) annual mortgage insurance rates.

FHA borrowers currently pay 0.85% annually in mortgage insurance premiums (MIP). That’s $1,700 per year, or $140 per month, on a $200,000 mortgage.

So it’s no wonder a possible MIP rate cut is big news. It could help new home buyers and refinancing homeowners save big on their housing payments.

Verify your FHA loan eligibility (Feb 8th, 2021)

Why experts think Biden will lower mortgage insurance premiums

Lowering FHA mortgage insurance rates isn’t a new idea from President Biden. It’s a holdover from former President Obama’s agenda.

American Banker magazine explains “The Department of Housing and Urban Development under former President Barack Obama had announced a scheduled 25-basis-point [0.25%] reduction in the FHA’s annual mortgage insurance premiums just before President Donald Trump took office.”

But Trump reversed this change at the start of his term, leaving FHA MIP rates at 0.85% per year.

Now, says American Banker, “observers expect the Biden administration to follow through on that 25-basis-point cut and potentially go even further.”

Lowering FHA MIP costs would be right in line with President Biden’s goals of expanding affordable housing opportunities for low- and middle-income families.

Of course, this is only speculation for now. No official announcements have been made.

But the pervasiveness of the rumor — and the absence of denials from the administration — mean a change seems likely.

So potential home buyers and FHA homeowners should be aware of what the (potential) change would mean for them.

What an MIP reduction could mean for you 

There’s good news and bad news.

The bad news is that if you already have an FHA loan if and when the reduction takes effect, you won’t see any savings. You would have to refinance into a new FHA loan to see the reduction.

The good news is that if you haven’t applied for an FHA loan yet if/when the cut is announced, you can likely take advantage of the new, lower fees.

But just how much would home buyers and refinancers stand to save?

A 25-basis-point reduction means MIP rates would fall by 0.25%. So you’d be paying 0.6% of your loan balance each year instead of the 0.85% that nearly all FHA borrowers now pay now.

These mortgage insurance rates are calculated annually but charged monthly.

Example: 0.25% MIP rate cut

Let’s say you plan to borrow $200,000 with an FHA loan. Your MIP rate at current levels would be 0.85%, making an annual charge of $1,700 — or $140 per month.

Now let’s assume the new MIP rate falls to 0.6%.

Your annual charge tumbles to $1,200. And your new monthly MIP cost would be exactly $100 per month.

That’s a saving of $500 a year, which few of us would sneeze at. But there’s a possibility that the savings could be even bigger.

Example: 0.50% MIP rate cut

American Banker wondered whether the Biden administration might “potentially go even further.”

So how does the math work if annual MIP rates were to be cut a little more — to 0.5%?

Assuming the same $200,000 loan, a 0.5% rate would reduce the annual payment to $1,000. And that would make the monthly payment just $83 versus $140 per month at current levels.

That would save you $700 a year over your current payment.

Rates haven’t changed yet…

Remember: this is just speculation. Unless and until an official announcement is made, you should continue to budget for your full, existing 0.85% MIP rate.

But if you’re considering a home purchase or refinance later this year, you should keep an eye out for news from the Department of Housing and Urban Development (HUD).

If a change is announced, it could be worth waiting on that application until you can secure the lower rate.

Verify your FHA loan eligibility (Feb 8th, 2021)

What happens to existing FHA loans?

Homeowners with an existing FHA loan may not benefit from lower mortgage insurance premiums right away.

An MIP rate reduction likely would not change the terms of your current mortgage.

So if a change is announced, you’d have to refinance into a new FHA loan to take advantage of MIP savings.

Keep Streamline Refinancing in mind

The good news is that FHA borrowers may well be in line for an FHA Streamline Refinance — a simplified, low-doc refi program.

FHA Streamline loans typically come with minimum paperwork, low costs, and no credit check. You likely won’t need a new home appraisal or income verification.

However, you’ll have to pay closing costs yourself — only the upfront mortgage insurance charge can be rolled into the loan balance.

And cashing out is not allowed with the FHA Streamline program. If you want cash-back with your refinance, you’ll need the FHA cash-out loan, which requires full underwriting.

How the MIP cut could contribute to the FHA Streamline “net tangible benefit” rule

Right now, FHA Streamline Refinances have a requirement that you gain a ‘net tangible benefit’ (some clear monetary advantage) as a result of using one.

This typically means you need to lower your ‘combined rate’ (mortgage interest plus mortgage insurance) by at least 0.5%.

Say the Biden administration does cut MIP rates by 0.25%. Under the current rule, you’d also need to lower your mortgage interest rate by 0.25% to be eligible for Streamline Refinancing.

But with rates trending downward through 2020 and into 2021, it’s quite likely that a 0.25% reduction is in reach.

But do keep in mind that your current FHA loan has to be at least 210 days old before you’re allowed to refinance.

When could the change take place?

Some mortgage industry insiders are expecting an announcement during President Joe Biden’s first 100 days in office. And they may be proved right.

But there’s a reason we rarely quote speculation from mortgage industry insiders. They’re often wrong.

And the fact is, nobody outside the government knows whether there will be an announcement at all, let alone its likely date. Which raises an important question: What are you supposed to do with this information?

What are you supposed to do with this information?

We wouldn’t be sharing this speculation with you if we didn’t think there was a good chance of the rate cut really happening. But there’s no guarantee it will.

So you probably shouldn’t change immediate plans to purchase a home or refinance.

Today’s FHA mortgage rates are at historic lows — and your interest rate has a much bigger impact on your total loan cost than your mortgage insurance rate.

If you wait on a rate cut and miss today’s low interest rates, it could negate your savings. You could also risk losing out on your dream home by waiting for financing.

Keep in mind, you only need to wait 210 days — about 7 months — from your FHA home purchase or refinance before you can refinance again.

If Biden does cut MIP rates, the change will be long-term. So you can always refinance if it makes financial sense for you to do so later on.

Verify your FHA loan eligibility (Feb 8th, 2021)

Will other aspects of FHA loans change?

Most people who opt for an FHA loan do so because it’s the easiest, most affordable path to homeownership that’s open to them.

American Banker describes FHA borrowers as, “traditionally first-time homebuyers and largely minorities and lower-income earners.”

And they choose FHA loans because they can get approved with lower credit scores and higher existing debts than Fannie Mae, Freddie Mac, and other conventional loans usually allow.

None of that’s likely to change if the Biden administration comes through with the rumored changes.

The only difference should be the amount these borrowers have to pay for their annual mortgage insurance.

Remember, there’s also an upfront mortgage insurance (UFMIP) fee equal to 1.75% of the loan amount. Most borrowers roll this into their loan balance so they don’t have to pay it at closing.

So far, we haven’t heard talk of the UFMIP rate changing — only the annual mortgage insurance premium of 0.85%.

The bottom line

An FHA MIP reduction would be a great win for borrowers, helping to keep monthly housing costs low.

If you plan to buy a home or refinance via an FHA loan later this year, there’s a good chance you could see lower mortgage insurance premiums.

But if you’re already in the process of buying or refinancing, we don’t recommend waiting on news of lower MIP rates. You’re likely to see bigger savings by taking advantage of today’s ultra-low mortgage rates.

Verify your new rate (Feb 8th, 2021)

Source: themortgagereports.com

DACA home loans — FHA will now approve home loans for ‘Dreamers.’ Here’s how to get approved

‘Dreamers’ can now get approved for FHA home loans

‘Dreamers’ — U.S. residents with DACA status — just got a huge boost to their homeownership dreams. The Federal Housing Administration (FHA) announced it had changed its policy on DACA home loans.

From this day forward, FHA is willing to approve home loans for DACA recipients — meaning they’ll get access to the low-down-payment FHA mortgage program that’s so popular with U.S. home buyers.

This new rule opens up the field of mortgage options for Dreamers, giving them access to a wider variety of affordable, accessible paths to homeownership.

Check your home loan options (Jan 25th, 2021)


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FHA’s new stance on DACA home loans

In a statement, U.S. Sen. Sherrod Brown (D-OH), who’s expected to soon chair the Senate Committee on Banking, Housing, and Urban Affairs, summed up what the change means: “DACA recipients are fully eligible for FHA loans.”

FHA’s new policy should make it easier for many Dreamers to buy real estate in the United States.

You might assume that this change was one of the first acts of the Biden administration. But, actually, it was one of the last of the outgoing Trump administration.

Previous FHA rules for DACA recipients

Official policy before January 19 (it was changed the day before it was announced) was that DACA recipients were ineligible for FHA loans.

According to the FHA Single Family Housing Handbook, “Non-US citizens without lawful residency in the U.S. are not eligible for FHA-insured mortgages.”

And up until January 19, those classified under the Deferred Action for Childhood Arrivals program (DACA) did not count as lawful residents according to HUD (the agency that manages the FHA).

FHA loans are one of the easiest mortgage programs to qualify for, having more lenient guidelines than many other home loans.

So for many Dreamers, the reversal of this policy is a significant change.

New FHA rules for Dreamers

Of course, the new rule only levels the playing field for DACA recipients.

Applicants still need to meet the same eligibility guidelines as every other lawful resident in order to get their FHA loan approved. More on those in a minute.

Note that Dreamers weren’t entirely locked out of homeownership even before the change.

They have always been eligible for some conventional loans, subject to lenders’ policies, including conforming ones that are offered by Fannie Mae.

Check your home loan options (Jan 25th, 2021)

FHA loan benefits

If Dreamers have been able to get some mortgage loans all along, what difference will access to FHA loans make?

Well, they’ll be able to access the same advantages that attracted more than 8 million borrowers who currently have single-family mortgages backed by the FHA.

Some of the biggest benefits of an FHA loan include:

  1. Small minimum down payment — Only 3.5% of the purchase price is required
  2. Lower credit score — Lenders approve applicants with FICO scores of just 580 and 3.5% down. You might even get a loan if yours is 500-579, if you can make a 10% down payment (though it will be harder to find a lender)
  3. More flexibility with existing debts — FHA loans typically allow higher debt-to-income ratios (DTIs) than other types of mortgages. So if you have a lot of existing debt, it could be easier to qualify

No wonder FHA loans are popular among first-time buyers and those who’ve been through difficult financial patches. And why they’re likely to appeal as DACA home loans.

One more thing. If you’re struggling to come up with a 3.5% down payment and cash for closing costs, explore the grants and loans (sometimes forgivable loans) that are open to homebuyers everywhere.

These down payment assistance programs are available in every state, and are often targeted toward first-time and lower-income home buyers who need a little extra help with their upfront housing costs.

FHA loan drawbacks

Inevitably, there’s a downside along with all those perks. FHA loans typically have higher borrowing costs than many other sorts of mortgage loans.

It’s not that FHA mortgage rates are higher. They’re actually pretty competitive.

Rather, the added cost comes from FHA loan mortgage insurance premiums (MIP).

MIP adds an upfront cost equal to 1.75% of your loan amount (most home buyers roll this into the mortgage balance). And it adds an annual cost equal to 0.85% of the loan balance (paid monthly).

Conventional loans charge mortgage insurance, too, if you put less than 20% down. But this can be canceled later on. With an FHA loan, by comparison, you have to refinance to get rid of MIP.

Mortgage insurance is not a bad thing if it helps you buy a home. But if you qualify for both an FHA loan and a conventional loan, be sure to compare the cost of mortgage insurance on each one so you understand which has higher long-term costs.

Which DACA recipients are eligible for an FHA mortgage?

If you’re a Dreamer, you may well find FHA loans appealing. And you’ll be anxious to know whether you personally are eligible.

So here, quoting extracts from the announcement, is what the FHA says borrowers will need:

  1. A valid Social Security Number (SSN), except for those employed by the World Bank, a foreign embassy, or equivalent employer identified by the Department of Housing and Urban Development (HUD)
  2. Eligibility to work in the U.S., as evidenced by the Employment Authorization Document issued by the USCIS
  3. To satisfy the same requirements, terms, and conditions as those for U.S. citizens

To the third point, those requirements include a credit score of at least 580; a down payment of at least 3.5%; and a debt-to-income ratio below 50%.

Your lender you apply with will require documents to verify credit, income, savings, and employment when you turn in your loan application.

You also need to make sure your loan amount (home price minus down payment) is within the FHA’s loan limits for your area.

FHA also requires that the property be your primary residence, meaning you must plan to live there full time.

Employment Authorization Document

That Employment Authorization Document is clearly central to your application succeeding. But suppose yours is due to expire within a year.

That shouldn’t be a problem. The FHA says:

“If the Employment Authorization Document will expire within one year and a prior history of residency status renewals exists, the lender may assume that continuation will be granted. If there are no prior renewals, the lender must determine the likelihood of renewal based on information from the USCIS.”

In other words, you should be fine if your status has already been renewed at least once. There’s an assumption it will be again.

If it hasn’t already been renewed, the lender will check with US Citizenship and Immigration Services (USCIS) to see how likely a renewal is.

Check your FHA loan eligibility (Jan 25th, 2021)

Other home loan options for Dreamers

We already mentioned that some lenders of “conventional loans” (meaning those that are not backed by the government) consider applications from Dreamers.

Fannie Mae’s conforming loans are also open to those in the DACA program.

Most mortgage lenders offer loans backed by Fannie Mae, and these include a wide variety of options like:

  • The 3% down Conventional 97 loan
  • The 3% down HomeReady loan for low-income buyers
  • Loans with less than 20% down WITH mortgage insurance (PMI)
  • Loans with 20% down payment or more and NO mortgage insurance

The situation is less clear for Freddie Mac (the other agency that backs “conforming” home loans).

Freddie’s guidance uses language that was similar to the FHA’s old wording. And those who lacked “lawful residency status” were ineligible. A search of its website on the day this was written revealed no hits for “DACA” or related terms.

But it may well be that Freddie will soon update or clarify its DACA policies now that the FHA has — and now that a new, more Dreamer-friendly administration is in place.

And it would be no surprise if other organizations (including the VA and USDA) similarly refined their policies in coming weeks to reflect those factors.

If you’re a DACA recipient in the market for a home loan in the coming year, keep an eye on the news and do periodic Google searches of these agencies to see whether any new loan programs have been added to your list of options.

Explore your home loan options (Jan 25th, 2021)

Which DACA home loans are best for you? 

On average, DACA recipients are younger than the US population as a whole, because they had to be under 31 years as of June 15, 2012. But, besides that, it may be a mistake to generalize about them.

Just as other American residents, some Dreamers will have stellar credit scores and others bad ones. Some will have plenty of savings and others won’t. And some will be laden with student loans and other debts, while others owe nothing.

So a DACA borrower needs to seek out the type of loan that best suits their personal financial circumstances — just like everyone else.

Those most attractive to lenders (high credit scores, 20% down payment, and small debts) will likely find a conventional loan to be their best bet.

Those with low scores, 3.5% down payment, and lots of debts may need to go for FHA loans.

And those between the two might find Fannie Mae offers their best deals. Better yet, Fannie requires a minimum down payment of just 3%.

Shop for loan options and mortgage rates

Whichever type of loan you choose, be aware that you’ll be borrowing from a private lender. The mortgage rates and overall deals you’ll be offered are likely to vary widely from one lender to the next.

So be sure to comparison shop for your mortgage, getting competitive quotes from several lenders and comparing them side by side.

That’s the best way to find a low interest rate and save money on your home loan, no matter which program you choose.

Verify your new rate (Jan 25th, 2021)

Source: themortgagereports.com

Mortgage mayhem: Lenders pull gov’t loans, refuse to lock, and raise credit score minimums

Wait — what’s going on in the mortgage market right now?

Last week, the Federal Reserve offered assurance to lenders who were struggling to price mortgage rates.

There’s no question this was helpful. 30-year mortgage rates responded by dropping to just 3.33% average for the week, nearing the all-time low from a few weeks ago.

In any other environment, that would be great news for home buyers and refinancers.

But right now? Not so much.

Lenders are acting unpredictably as they face challenges they’ve never experienced before. It’s getting harder for them to make good loans and stay profitable.

In turn, borrowers are facing bigger and bigger hurdles.

Entire loan programs are disappearing, lenders are raising credit score minimums, and some won’t even lock your rate.

Here’s how to make sense of it all.

Verify your new rate (Jan 19th, 2021)

Lenders are tightening credit standards

As the economy continues to act erratically, many lenders are forced to take their own actions to help sustain themselves.

Lenders are making significant changes to FHA, VA and USDA loans. These changes could make home loans unavailable for mortgage borrowers who could have qualified just weeks earlier.

Some lenders have completely withdrawn government-backed loans — refusing to offer them at all for the time being.

And lenders that are still in the game have upped their minimum credit score requirements by as much as 100 points. To give just a few examples:

  • Wells Fargo has adjusted its minimum score requirement to 680 for all government loans (FHA, VA, and USDA)
  • US Bank also requires a 680 credit score for FHA, VA, and USDA loans, and 640 for conventional loans
  • loanDepot is requiring a 620 minimum FICO score for VA and FHA loans with a higher score (660+) for cash-out or streamline refinancing
  • Flagstar is requiring a 640 score for both purchase transactions and non-cash out refinances

Many other lenders are at 660 minimum for these types of loans.

While some lenders are still offering mortgage loans with scores as low as 620, many are setting standards so high that very few fit into the small window of eligibility.

For example, many lenders advertising a 620 credit score are doing so only if you can meet certain requirements.  For example, you might need:

  • At least two month’s worth of payments in the bank
  • No gift funds allowed for down payment or closing costs
  • No non-owner occupants without a 680 credit score

For many people who choose government-backed loans like FHA or VA, the looser qualification guidelines are a big draw.

The more stringent requirements lenders are putting in place could make home loans inaccessible for many until coronavirus fears calm down.

Some mortgage companies won’t let you lock at today’s rates

Mortgage lenders are tightening their rate lock requirements too.

Many won’t allow mortgage borrowers to lock until their loan is clear to close.

Effectively, that means you might not know what your mortgage rate is until you’re ready to sign your final papers days before the loan is completed and potentially week or months after you applied.

You might not know what your mortgage rate is until you’re ready to sign your final papers.

For many refinancers, that could make the point of refinancing moot, if their rate isn’t low enough to justify the closing costs.

And for buyers, a high rate could mean starting the loan shopping process again from ground zero.

Other lenders refusing to lock rates at all until the volatility slows down.

How the bailout could cripple the mortgage industry

You might wonder why lenders are cracking down so much on new borrowers.

Isn’t the Fed offering mortgage bankers huge bailouts? And wouldn’t lenders want more business in a time when many industries are going under?

Well, it’s not quite that simple.

The Fed’s unprecedented $183 billion purchase of mortgage-backed securities recently was meant to drive down mortgage rates. And, it worked.

However, mortgage servicers are now facing a difficult position as more homeowners elect to suspend payments during the crisis.

When a homeowner misses a payment, servicing companies are contractually obligated to advance payments to investors in securities markets.

The Mortgage Bankers Association warns that the U.S. housing market is “in danger of large-scale disruption,” due to efforts by the Federal Reserve that were intended to help rescue the mortgage market.

In other words, you’re not paying your mortgage company, but it still has to pay its own creditors.

A flood of missed mortgage payments is threatening to bankrupt U.S. mortgage lenders, deepening the economic toll of the pandemic.

The Mortgage Bankers Association (MBA), in a dismal letter to regulators, warned that the U.S. housing market is “in danger of large-scale disruption,” due to efforts by the Federal Reserve that were intended to help rescue the mortgage market.

>> Related: How to pause mortgage payments if you lost your job due to COVID-19

What’s happening to mortgage companies behind the scenes

This is where it gets technical.

The Feds forcefully entered the mortgage market a couple of weeks ago — in part, to combat rising rates. And in part, because of a fear that borrowers wouldn’t be able to pay their loans.

All told, the Fed has purchased $250 billion in mortgages over the past two weeks.

That’s $84 billion more than the Fed had bought over any four-week period during the financial crisis in 2009.

While the Fed helped drive rates down, they also blew up a widespread “hedge” that mortgage lenders use to protect themselves against rate increases.

Hedging pays lenders if the prevailing rate in the market is higher than the mortgage rate they locked in with the customer.

Normally, hedging is considered to be a safe trade. The hedge simply protects the lender against higher rates until the mortgage closes.

This system works well, most of the time.

But when mortgage rates are highly volatile — as they’ve been these past weeks — it’s difficult for lenders to use the same hedging strategy.

And, compounding the problem, many would-be homeowners couldn’t close on their loans because of quarantines.

Locking lots of loans that didn’t close left mortgage lenders with only the cost of the hedge and no income from the loan closing.

The huge volatility in mortgage bonds created massive margin calls from the broker-dealers, who wrote the hedges, to their mortgage bankers.

According to Barry Habib, founder of MBS Highway, “Some of these mortgage bankers are now facing margin calls of tens of millions of dollars that could drive them out of business.”

In its letter to regulators, the MBA said:  “The dramatic price volatility in the market for agency mortgage-backed securities [MBS] over the past week is leading to broker-dealer margin calls on mortgage lenders’ hedge positions that are unsustainable for many such lenders.”

The letter went on to say, “Margin calls on mortgage lenders reached staggering and unprecedented levels by the end of the week. For a significant number of lenders, many of which are well-capitalized, these margin calls are eroding their working capital and threatening their ability to continue to operate.”

While the stock market is playing a game of Chutes and Ladders, lenders are scurrying to find ways to continue to successfully operate in foreign territory.

What should you do if you’re trying to get a mortgage?

The roller coaster ride that mortgage lenders are experiencing isn’t all doom and gloom for you.

In fact, there is a bit of a silver lining for mortgage borrowers. Until the economy settles down, mortgage lenders are trying to balance how much to pull back vs making good loans.

Not all lenders are reacting the same way.

This means some lenders have not instituted minimum score requirements as low as their competitors. Some lenders may not be hedging as much as others, which means lower rates.

Now more than ever before, mortgage borrowers should shop around until they find a lender that can fit your needs.

>> Related: How to shop for a mortgage and compare rates

Questions you should ask a mortgage lender right now

If you’re currently in the market for a loan, you’ll want to make sure you’re asking your lender plenty of questions:

  • What are your minimum credit score requirements?
  • How long do you expect it to take from application to closing?
  • At what point can I lock my rate and for how long?
  • What happens if my loan doesn’t close within the allotted rate lock period?
  • Who will be responsible for rate extension fees if my loan doesn’t close on time?
  • Do you have a float-down policy if rates drop significantly after locking?
  • Is the rate you’re quoting me include any discount points?

Unlike the housing crash a decade ago, the housing and mortgage markets are much healthier now.

Homeowners have a record amount of equity, so there’s less risk of home values dropping far enough to put many homeowners underwater (like what happened during the subprime mortgage crisis).

Is it a good time to act on low rates?

Say you find a low rate, and a lender that’s still offering favorable loan terms.

Even then, you should weigh the decision of taking out a new loan carefully.

How stable is your job looking right now? How much do you have in savings? And if you were to become unemployed, could you still make the mortgage payment?

Some borrowers might stand to benefit from today’s low rates, but it’s certainly not the right time for everyone.

Rates will likely stay low even after this crisis is over, so don’t think staying on the safe side will backfire. Make the decision that’s best for you.

Verify your new rate (Jan 19th, 2021)

Source: themortgagereports.com

New study: These are the best months (and days) to list your house

Time it right

Planning to list your house soon? You just may have hit the sweet spot. According to a new study, homes listed in April and May sell the fastest and bring in the most profits.

Verify your new rate (Jan 19th, 2021)

List your house in spring for best results

A new study from Zillow shows that “mid-to-late spring” is the unequivocal best time to sell a house. 

According to the data, homes listed in May sell for more than those listed in any other month of the year. And homes listed in April? They sell the fastest.

Here how Zillow Economist Jeff Tucker, sums it up: “The best windows to list your home and sell it in the shortest amount of time or for the most money, respectively, are slightly different. But in general, selling a home for sale in mid-to-late spring offers the most benefits for sellers in most large markets nationwide.”

Sellers: These features can help your listing get more attention

May vs. April homes for sale

All in all, homes listed in May sell for about 1% more than expected — or around $2,100 on the average home. 

May is also the most profitable month to list your house in 17 of the top 35 metro markets. In Minneapolis-St. Paul, you can make a 2% premium on your home, or about $5,700, by listing in early May. Seattle’s premium is 1.8% for the same time period.

Though homes listed in May sell fast (about six days faster than average), it’s not the fastest-selling month by any means. That’d be April, when homes sell a full week faster than average. Home listed in April also bring in about a $1,500 premium over other months.

Where home values should rise the most in 2020

Listing timing matters

Zillow’s study looked beyond monthly data, too. According to the findings, listings get their most attention in their first two days on the market. Interest starts to fade by mid-week, and listing views are halved by day 5 and then halved again by day 14.

Homes listed on Saturdays get the most total views, followed by those listed on Sunday and Friday. 

“It turns out that a good bet is to list on a weekend,” Tucker says. “The difference between the best and worst days is about 24%: that is, nationwide, homes listed on Saturdays get seen about a quarter more in their first week than homes listed on a Tuesday.”

Verify your new rate (Jan 19th, 2021)

Get today’s mortgage rates

Are you about to list your house? Make sure you’re prequalified before you start shopping for that move-up home. Get started and see what rates you qualify for today.

Verify your new rate (Jan 19th, 2021)

Source: themortgagereports.com

Prime jumbo mortgage lending by nonbanks set to grow in 2021

The prime jumbo mortgage business is likely to benefit from the Consumer Financial Protection Bureau’s recent revisions to the Qualified Mortgage and Ability-to-Repay rules, which loosen certain standards established after the financial crisis.

But those offering jumbo products will have to compete against conforming lenders whose loan limit is now $544,250. The new high-cost area limit of $822,375 for both conforming and the Federal Housing Administration loans, though it applies to a much smaller group of borrowers, could also increase competition.

But with home prices inching up, the market for larger mortgages could likewise expand. In 312 U.S. cities, the typical value of a home is now over $1 million, most of them clustered around nine East and West Coast metro areas. That’s a net gain of 45 cities in the last year, according to Zillow. Back in 2015, there were only 208 that met this criteria.

“In 2020, home values soared nationwide because of incredible demand across all price tiers, which we expect to continue well into 2021,” Chris Glynn, a Zillow senior economist, said in a press release.

The prime jumbo lenders National Mortgage News spoke with are bullish on their prospects for this year.

“The real opportunity in 2021 is that business models that were designed as ‘red-light, green-light non-QM, QM’ will now be blurred in terms of how they are executed,” said Brian Filkey, the chief strategy officer at Interfirst. “So our focus is on being able to execute both agency and private loans, which will both potentially go through the same avenues of execution.”

The change in the ATR rule — now based on price, rather than debt-to-income ratio — eases the path for prime jumbo lenders, noted Cherry Creek Mortgage’s Matt Garlinghouse, executive vice president of capital markets.

“The debt-to-income threshold had some limitations with it in terms of underwriting and it had some hits and misses as it relates to income and affordability and ability to repay,” said Garlinghouse. “For the prime jumbo market, when you think of the private sector versus the agency side, it puts things at more parity, on a level playing field.”

The change will encourage more lending from outside the agencies or the federally backed programs, he said. “That’s actually pretty good news for the players that are doing anything meaningful in the nonconforming prime jumbo market,” Garlinghouse said.

The more flexible ATR standard will allow lenders to raise the debt-to-income ratio they underwrite to in order to manage their own risk while still having the opportunity to qualify for the safe harbor, Angel Oak Home Loans CEO Steven Schwalb said. But the company won’t be loosening standards too drastically.

“We’re of course prudent where it is prudent to have that higher DTI,” Schwalb said. “When you loan somebody $1 million, do you really want to put them out over their skis in cash flow? I personally don’t. But do I think we’ll see some guys go up to 50% DTI? Probably so.”

Interfirst is not worried about increased competition, Filkey said. Most of these companies that are doing prime jumbo are doing other types of loans “which are literally falling from the sky. So how much of that product do you want to do when you can be pumping out these loans with very low risk on the other side of the fence?”

On the other hand “we’re not just going to take what’s available today and neglect what we would need to build for tomorrow,” he continued. So Interfirst is creating different operational functions to handle specific channels and product sets.

Filkey joined Interfirst in October and part of his job is to create alternative funding sources that are more immune to any disruptions in the marketplace like what occurred back in March and April of 2020 due to the pandemic. At Interfirst, that comes from a combination of balance sheet and non-leverage-focused investors, aggregation facilities that are not marked-to-market, and additionally other execution options.

Interfirst spent a significant portion of the last nine months working through a proprietary execution strategy that uses more of a reinsurance concept, like the agencies’ credit risk transfer, rather than securitization.

“Learning from the mistakes and standing on the shoulders of those that came before us. We’re looking at not using the same exact game plan as everyone else from a funding perspective,” Filkey said.

Over at Cherry Creek, which lends in some of the higher cost markets in the Pacific Northwest, prime jumbo loans make up approximately about 12.5% to 15% of originations, while government is less than 10% and conforming makes up the rest. Nonetheless, most of their borrowers have credit scores closer to 800 than 700, Garlinghouse said.

The market upheaval in the early portion of the pandemic did not hurt Cherry Creek’s prime jumbo business.

“A few of our investor partners on the nonagency side, thankfully, were pretty committed to the space and we didn’t see much disruption at all,” Garlinghouse said. Still, “everyone across the board, especially on the nonagency side, tightened underwriting a bit as to be expected, post-COVID. Then as the dust settled, they started to open things back up.”

For 2021, Cherry Creek is planning to grow its prime jumbo originations. “We’re pretty bullish in it and we’re exploring a lot of different avenues to participate more in this space as an independent mortgage banker, with a little bit of an eye for where things are going in the future,” Garlinghouse said. “So we got to be a little proactive in anticipation of some things that might change and give ourselves some flexibility if there’s a slight disruption.”

While the company is primarily a retail shop, it also has a wholesale channel. The company plans to increase its prime jumbo volume in the third party origination segment.

By contrast, Angel Oak Home Loans only offers prime jumbo through its retail channel, and most of what it does meets the QM standard, Schwalb said. He sees an opportunity ahead to grab a larger market share of prime jumbo loans.

Prime jumbo for many years had been dominated by banks that were looking for business relationships with the high net worth customer. As a result, for extended periods, average jumbo mortgage pricing was lower than what was being given for conforming mortgages.

The pandemic changed that and the inversion has been reversed. So currently, “we see a robust market for prime jumbo, simply because the banks have not been pricing for this. The execution that we’re receiving has been a big competitive advantage,” Schwalb said.

Because the banks were seeking the relationship, they would just price everyone out of the market. “But now there’s an appetite, with liquidity for nonbanks through the conduits that give really competitive pricing for the prime jumbo,” Schwalb added.

He expects that nonbanks will remain competitive for the prime jumbo product throughout this year.

However, as conditions change, especially as the pandemic wanes and more people receive a vaccine, the banks’ risk appetite could return and they could again seek these loans and offer lower pricing than the nonbanks.

But such a switch is not likely to occur until the latter part of 2021 or the earlier part of 2022, Schwalb added.

Source: nationalmortgagenews.com

2020 new construction features: Walk-in closets, energy-efficient lights & more

New home features for 2020

If buying a new construction property is on your radar in 2020, you can expect a walk-in closet, low-E windows, and energy-efficient lighting. According to a new report, these are the features builders are most likely to include in new properties this year.

Features you’ll find in 2020 new construction

According to new data from the National Association of Home Builders, walk-in master closets and low-E windows are the features you’re most likely to find in this year’s new construction. 

Builders also say they’re looking to include efficient lighting options, great rooms, kitchen islands, programmable thermostats, and Energy Star appliances. Nine-foot ceilings on the first floor, front porches, and exterior lighting are all on high their lists, too.

In the kitchen, walk-in pantries and granite countertops are likely — a smart move, considering walk-in pantries are one of the most-coveted features with first-time homebuyers.

Single homeownership is on the rise — especially in these age groups

Hard-to-find new construction features

What you won’t find in new construction this year? That’d be cork flooring, geothermal heat pumps, and solar water heating. These all ranked at the bottom of builders’ planned features list.

Dual toilets in the master bathroom, laminate countertops, and pet washing stations are also unlikely. Add-on spaces like sunrooms, media rooms, and outdoor kitchen spaces aren’t high on builders’ lists, either.

According to Rose Quint, assistant vice president for survey research, new construction featured tend to vary based on several factors.

“Home builders make a lot of decisions about how to run their businesses every day,” Quint said. “Among their most critical determinations is what features to include in the homes they build.  Experience, region, trends, target audience, and many other factors play a role in a decision that directly affects their bottom line.”

How to pause mortgage payments is your laid off due to COVID-19

Get today’s mortgage rates

Are you thinking of buying a new construction property in 2020? Then shop around and see what mortgage rates you qualify for today.

Source: themortgagereports.com