March 12, 2008 Newsletter
This is the Fourth issue of the Colony Title Newsletter.
Interest rates are the topic of the day, and this time they are still in the low sixes for thirty year fixed mortgages. But do not despair. Lenders, as was discussed in previous newsletters, need to make a certain spread between their borrowing rate and the rate to be given to the consumer. The Fed rate is still at 3.0, allowing the banks a 3 percent spread, before any costs are figured in. With more conservative underwriting guidelines and the bond market going the opposite direction, rates will probably take awhile before retreating into the mid five percent range.
If you are thinking refinance or purchase, it would not be a bad idea to contact a lender, (we have several sources if you want a recommendation), and at least make application. Do not fix a rate as of yet, but you can find out how much you can borrow, and be in the pipeline when the rates drop. Once the rates do decline, we expect the volume to increase, and since lenders have had massive layoffs, the time taken to get your loan through will be longer. Additionally, if you are refi-ing and you have a second you intend to keep in place, you need to start early getting that loan subordinated. We are seeing subordinations taking over a month to complete, which used to take a week. (Subordination is where your home equity lender agrees to remain in second position behind a new first mortgage lender).
The government has increased the lending limit for FHA loans (March 6th) which should encourage some first time home buyers with little down payment to purchase with as little as 3 percent down. That is good news for sellers of properties with asking prices up to $560,000.00 for central Maryland counties and $729,750.00 for DC suburb counties. If you have a home listed in those areas, which previously were out of reach for buyers with little down payment, life just got a little better.
Credit restoration. If you, or a friend or relative is trying to buy or refi and your credit score is too low, look to repairing your credit. It is something you can do yourself, or for a fee, can pay a company to take the time and energy to contact your creditors and remove incorrect marks on your credit. Raising your credit score 30-50 points might be the difference in qualifying for the loan you want.
If this is your first newsletter and you want more information on topics covered previously, including reverse mortgages, fractional ownership, investment property ideas, 1031 exchanges, please email me at email@example.com. Thanks for reading and we look forward to hearing from you.