In Eugene, as in the rest of the nation, lending standards for HUD insured loans—an increasingly popular option for home buyers—are becoming stricter. The following changes are scheduled or planned to occur this year:
- Increased mortgage insurance premium—beginning mid-April, the rate will be 2.25%, up from 1.75%
- Increased down-payment (10% vs. 3.5%) for borrowers with a FICO less than 580
- Reduction of seller concessions from 3% from 6%
These changes will make it harder for some borrowers to get loans, and will soften demand, somewhat, for house purchases. However, at least the changes aren’t too drastic.
HUD loans are a bright spot in a thorny lending environment.
Treasury yields have been climbing higher since fall 2010. As a result, mortgage rates have been moving higher as well—and have topped 5% for the first time in months. Mortgage rates move in tandem with Treasury yields; specifically 30-year mortgages track 10-year bonds. While rates are currently still near historic lows and very affordable, they are predicted to go up in 2011, perhaps to 6%.
Good news for those looking to refinance, the national average for interest on 30-year fixed loans has sunk to just 4.69 percent. These are the lowest interest rates that have been seen on home loans for around 50 years. While these rates are great for home buyers or those looking to refinance, they could be worse for those trying to save through savings accounts and CDs, as interest rates on these have fallen as well. In all, around 291,000 homeowners have refinanced as of March.
As predicted here, nearly a year ago, the recession ended 3rd quarter, 2009. The government is keeping home mortgage rates low at least through March, 2010. How? It has been buying a large proportion of the mortgages issued, and says it will complete its plan to buy some 1.25 trillion dollars worth, slated to be complete March, 2010. If you’re looking for property, it is a good time to buy.
Home Mortgage Rates are at Historic Lows
Credit scores are increasingly important to getting loans, and loans of course are usually necessary to purchase a house. Banks have grown more and more averse to bad loans, so they’re wanting better credit scores. And the higher your score, the lower your interest rates.
FICO scores of 760, up from 720, are now necessary to get the cheapest rates on conventional 30 year fixed mortgages, according to a 3 January 09 WSJ article. The article also said that the new FICO scoring model will be even more sensitive to on time payments. So, pay your bill on time, if you can.
Sky-High Credit is Required for Best Interest Rates. Photo from Springfield Oregon.
Mortgage interest rates have dipped to historical lows. Last week, three of my mortgage writing friends were quoting par rates (no buydown) below 5% in Eugene. This was for a fixed-rate, conventional, 30 year loan (my favorite).
Principal and interest payments for a $175,000 loan would be in the $900/month range. These days, lenders are wanting credit scores above 680, at least for the best rates.
My title company friends have said business is increasing, which you might expect with refinances. But, with more rigorous standards for loans as well as potential difficulty in getting properties to appraise-out, the tsunami of refinances hasn’t happened yet.
Lower mortgage rates are bound to help stabilize housing prices. When? My guess is by summer of 2009
Interest Rates Have Plummeted.
The Fed cut federal funds target rate to near zero, down ~1%. The rate was 4.25% last December, and 5.25% Dec. 2006
The announced cut affected short term rates, and things tied to the discount rate, like prime-rate and charge card interest. It didn’t effect mortgage interest rates per se but other Fed activities have, namely, purchasing (and announcing the purchase) of treasury notes, bills, and bonds. Mortgage interest rates are at near historic lows.
The Fed’s announcement makes the rate in the United States the lowest in the Western World. Eventually, this will have an inflationary effect and rates will need to rise. Don’t look for this any time soon.
Fed Target Rate