THE BASIS POINT

Three New Deal Killers Homebuyers Need To Be Aware Of

 

Zero-point rates on 30yr fixed Conforming loans (up to $729k) held last week near record lows for a second straight week, and one-point rates on Jumbo loans (above $729k) are steady in the low- to mid-5% range.

Rate Lock Advisory Week of June 14
WeeklyBasis continues its rate lock bias going into next week because European debt problems that caused U.S. rates to drop during May and early-June are easing, and rates could reverse as a result.

This coming market week of June 14-18 is likely neutral for rates. We’ve got business and consumer inflation reports Wednesday and Thursday, and housing starts and building permits Wednesday. The X-factors for rate markets are ongoing global debt fears, and continued Senate and House debate to reconcile their two versions of financial reform bills. Mortgage bonds remain in a slightly overbought state, and if these bonds sell off, rates would rise.

Three Deal Killers To Be Aware Of
Borrowers and their Realtors should be aware of three key topics of recent weeks that can delay or kill deals. In all three cases, you should ask for clear answers from your lender on whether they can fund loans with these characteristics BEFORE going forward on the loan and before writing an offer to buy a home.

(1) Two Credit Reports During Loan Process
As of June 1, Fannie Mae is requiring that lenders who sell loans to them (most lenders do this) run a second credit report on the borrower before the loan funds to make sure the borrower still qualifies for the loan. This means borrowers should severely limit all credit-related spending activity and check with their lender before engaging in any activity. If a pre-funding credit report is different from the credit report run at time of application, loan funding could be delayed or ineligible. Click here for more on this rule and what it means for credit scores.

(2) Restrictions On Property Flips
If any currently listed property was bought in the past three months, most lenders have restrictions on loans made to someone buying that property. Since many properties listed now were bought in recent months at deep discounts by investors with the intent to quickly fix and sell (or “flip”), lenders often question the value of these properties when they come back onto market. Some lenders won’t even lend on a property that’s a flip. And the lenders who do usually require two appraisals to verify the value and quality of the home. Often, loan agents issue loan pre-approval letters to borrowers without pre-approving the borrower’s target property, so make sure your lender checks out your target properties before you write any offers—loans are funded based on approving borrowers AND properties.

(3) Funding Delays On Flood Zone Properties
If you’re seeking a loan on a property in a FEMA-designated flood zone, FEMA is currently not allowing new flood insurance policies (for homebuyers) or extensions of existing flood insurance policies (for refinancers) until Congress reauthorizes the Program that expired May 28. Lenders won’t fund a loan on a flood zone property without insurance (and it should also be noted that they won’t fund a loan on any property without basic, non-flood insurance). FEMA has said a Congressional vote to reinstate flood insurance won’t occur until Tuesday, June 15 “at the earliest.” FEMA posts latest on this topic here. Borrowers with applicable properties need to have this conversation with their lender to determine loan eligibility before entering into a purchase or refinance loan transaction.

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CONFORMING RATES ($200,000 – $417,000) 0 POINT
30 Year: 4.75% (4.87% APR)
FHA 30 Year: 4.75% (4.89% APR)
5/1 ARM: 3.5% (3.62% APR)

SUPER-CONFORMING RATES ($417,001 to $729,750 cap by county) 0 POINT
30 Year: 4.875% (4.99% APR)
FHA 30 Year: 4.875% (4.99% APR)
5/1 ARM: 4.25% (4.37% APR)

JUMBO RATES ($729,751 – $2,00,000) 1 POINT
30 Year: 5.375% (5.49% APR)
5/1 ARM: 4.5% (4.62% APR)

 

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