WeeklyBasis 9/21/09: Big News For Condo Buyers With Less Than 20% Down

RATE/MARKET UPDATE
This is the sixth consecutive week with rates hovering just above record lows we saw from January to through May 21. That day began a massive mortgage bond selloff caused by bond oversupply concerns. It was the pre-summer kickoff of an unprecedented campaign of Treasury security issuance to raise money for government economic stimulus. When mortgage bonds sell off, bond yields (or rates) rise.

Market sentiment shifted in the past six weeks to be more in favor of Treasury debt since government-backed assets seemed the better bet than the stock market. As we kick off this week, we’ve got yet another record $112b of 2yr, 5yr, and 7yr auctions to absorb. After such a nice run, we may see a shift back to oversupply sentiment for mortgage bond traders. It will depend largely what the Fed says Wednesday after their FOMC meeting. If they say firmly inflation isn’t a threat, bonds and rates should hold their ground. If there’s a signal inflation will be an issue sooner than anticipated, rates will suffer.

BIG NEWS FOR FHA CONDO LOANS
I previously announced that unit-specific ‘Spot Approvals’ for FHA loans were being eliminated by HUD for all deals October 1 forward, and now the FHA has extended this deadline until November 1. This is big news especially in a market like San Francisco where the list of fully approved FHA condo projects is so small.

It’s absolutely critical for any homebuyer or Realtor dealing with condos up to a price point of $850k and considering down payments less than 20% down to understand what these FHA condo rules mean. FHA loans are by far the most viable way to get a loan (on any property including condos) with less than 20% down right now. Here is a full Q&A on FHA loans which includes a detailed section on these new condo rules. Note that an entire building has to be approved to get a condo FHA loan after November 1, and HUD is taking about eight weeks to approve projects—this wait time is sure to grow after November1 .

Anyone looking to buy a condo this year with a price up to $850k with less than 20% down should strongly consider this: The $8000 Federal tax credit that requires a transaction close by end of November and FHA Condo Spot Approvals are going away November 1.

CONFORMING RATES ($200,000 – $417,000) – 1 POINT
30 Year: 5.0% (5.14% APR)
FHA 30 Year: 5.0% (5.16% APR)
5/1 ARM: 3.75% (3.9% APR)

SUPER-CONFORMING RATES ($417,001 to $729,750 cap by county) – 1 POINT
30 Year: 5.25% (5.41% APR)
FHA 30 Year: 5.25% (5.43% APR)
5/1 ARM: 4.0% (4.16% APR)

JUMBO RATES ($625,500 – $3,500,000) – 1 POINT
30 Year: 6.0% (6.275% APR)
10/1 ARM: 6.25% (6.39% APR)
5/1 ARM: 5.25% (5.43% APR)