Mortgage Updates

With the ringing in of the 2008 new year, credit scores will further impact your buying power.  Over the last six months we have seen the perks and rewards for great scores (over 720) nearly evaporate with the elimination of No Income Documentation loan programs.  Now however, with scores over 680 homebuyers will avoid the cost associated with the newly mandated risk based pricing.

Due to the large volume of non performing loans both Fannie Mae and Freddie Mac have instituted punitive pricing (extra costs) for would be home buyers with credit scores of 679 or less.  This means that for buyers with the lowest scores (below 620) there is an additional 2 point cost... making the best rate (par pricing 3 points total) or bumping the interest rate by roughly 1/2 percent.

FHA is taking a bit different approach.  Since FHA collects an MIP upfront (mostly financed) and a monthly premium, the adjustments will be made in both areas. HUD loan performance has shown that buyers using 100% gift funds for down payment are more likely to have problems.  Since these loans are more likely to go into default and foreclosure a higher MIP premium is being levied at closing.  Of course credit scores also factor into this equation starting with scores under 679.

With all the attention focused on the banking crisis (yes it is still with us) the loan credit markets will only continue to tighten.  We are expecting heightened regulations on all fronts; credit, documentation, required reserves, and of course the appraisal of the ultimate collateral- the property.  Expect everything to be under a significantly increased level of scrutiny.  Based on the mortgage melt down mire we are in... can we expect any less?

As always your comments are welcomed.  - Ingrid