The summer of 2011 has been an interesting one in the world of mortgage lending.
Rates have continued to hover at near-record levels. Thirty-year fixed rate conventional mortgages (mortgages with loan levels of $729,000 or less in high cost areas like the D.C. Metro area) have been in the mid to high 4 percent range for several weeks. Rates are slightly lower for purchase money loans. Credit scores and loan to value can also influence rates. Rates for investment property are also higher.
Rates on 15-year fixed rate mortgages and adjustable rate mortgages are actually lower then before, even last fall when 30-year fixed rate mortgages were at their lowest point.
In recent weeks, 15-year fixed rate mortgages have been in the mid to high 3’s. Adjustable rate mortgages have been in the 3’s for five-year adjustable rate mortgages to the low four percent range in recent weeks. Rates are lowest for purchase money and primary mortgages.
Loan limits are being lowered for high conforming mortgages. The “old” limit is $729,000 in high cost areas. This includes the Washington, D.C. metropolitan area. This does not include Baltimore and a lot of other areas. The new limits will be $629,000. Jumbo rates, which are slightly higher, are needed above these limits.
There are rumors that the change in the high-conforming loan limits will not be changed as planned this fall. There is fear that in the high-cost areas, the lowering of the loan limits will put a damper on already weak real estate markets. The logic of lowering the high-conforming loan limits is the government is trying to unwind the exposure of the government-sponsored entities, Fannie Mae and Freddie Mac.
Underwriting standards continue to be very strict. In order to get a mortgage loan these days, one has to be fully documented. Pay stubs and W-2’s are in order. For those that are self-employed, 1099’s and tax returns are needed and both personal and business returns will be required. For attorneys and business owners, K-1’s will also be required.
For assets 60 days of statements with all pages intact will be required. Most non-payroll deposits will require a letter of explanation.
Do not expect the standards in the industry to be relaxed anytime in the near future. If you are thinking about buying a home or refinancing in the near future, take some extra time to prepare and be patient. Everyone is being treated equally.
Bill Starrels lives in Georgetown. He is a mortgage loan officer who specializes in purchasing and refinancing mortgages. He can be reached at 703-625-7355 or at email@example.com.