Easier Money for Mortgages

Signs of Easier Money for Mortgages- NYT

Over the past 2.5 years, I've lost count of how many times customers have made a comment to the effect of "What are you going to ask from me next, my firstborn child?"  This article, from the New York Times, gives me hope that perhaps I will be hearing less of this kind of remark in the coming months and years.

Click here for current mortgage interest rates courtesy of Bankrate.com.

Banks are beginning to loosen up on their strangle-hold of credit, tinkering with one aspect of a loan at a time.  For example, if someone has a less than stellar credit score, but has an excellent income, they may be willing to lend at a higher loan to value percentage.  Or conversely, if a borrower has a fantastic credit score, but can only put down 5% on the property they are purchasing, again- the banks these days are willing to work with that person.  Or at least consider it.  

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Mortgage requirements are still quite rigorous but there are signs that banks are becoming just a bit more flexible... for people they consider qualified.  The piggyback loan (a first mortgage and a line of credit attached) allows borrowers to obtain more than 80% financing while avoiding the mortgage insurance that they would otherwise have to pay for going over 80% loan to value.  Another means of working with the customer (more extreme in my opinion) is that offering by NASA Federal Credit Union and Navy Federal Credit Union- these two institutions are offering 100% financing to some borrowers in markets that they consider to have stabilized or where home values are on the upswing.  In my own experience, the only 100% financing that I see is for VA loans.  

It is a great thing to have more options available, especially as fees for FHA (Federal Housing Administration) loans inch higher. The upfront mortgage premium (which can be rolled into the loan amount) is 1.75% and the mortgage insurance premium (the monthly add-on for mortgage insurance) rose from 1.25% to 1.35% as of April 1st.  The biggest change in my opinion, is the fact that the mortgage premium used to only be paid until the loan amount was less than 78% of the value of the home.  As of April 1st, in most circumstances, the mortgage premium is due for the entire life of the loan.  This greatly increases the cost of the loan over its life and may be a real game-changer.

I look forward to seeing where banks go from here... will they continue to loosen the reigns a little bit?  Will the housing market continue to pick up?  Will the refinance market die out?  These questions are extremely relevant to my day-to-day activities and I will continue to keep a close eye on them.