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Mortgage Lending is Finishing Strong in 2014

As we enter the final two months of the year, there is much to be excited about when it comes to mortgage lending.  The availability of various mortgage products and the presence of low interest rates are two of the main reasons why consumers were able to experience the American dream of homeownership this year and why many more will do the same as we close out 2014.

2014 may be remembered as the year where interest rate experts were completely wrong about rates.  As we entered this year, many experts had predicted that rates would hit 5% by the summer.  As the summer came and went, this prediction proved to be false and we actually saw a drop in rates.  More bad news for experts followed last month when rates dropped even further and hit the lowest mark seen since June of 2013. The 30yr fixed rate dropped below 4% and the 15yr rate dropped to 3.25%.  This sudden drop in rates created a significant increase in refinance applications. Hopefully, this will encourage prospective buyers to hurry up and find their dream home before the year ends.  The drop in rates we experienced last month was anywhere from .25% to .375%.  This is about $660 a year in interest savings on a $250,000 loan.

In addition, there are numerous loan programs available which are becoming increasingly aggressive with the hopes of encouraging buyers back into the real estate market.  If someone is looking to put the least amount of money down as possible, then the FHA loan with 3.5% down is a great option.  This loan is available with credit scores as low as 580 and debt to income ratios as high as 56.9%!  The downside of FHA has been the high mortgage insurance it carries. However, there have been some positive modifications to that recently and, if FHA loans continue to perform well, then it should continue to improve.

Conventional (aka Fannie Mae and Freddie Mac) loans recently brought back the 3% down program in an effort to compete with FHA.  Credit scores need to be a little higher (minimum of a 620 score) and debt to income ratios cannot exceed 49.9%. These loans do carry lower mortgage insurance rates as long as you are putting down less than 20%.  The following are some other niche programs that are now available to consumers:

  • 1yr self-employed tax returns
  • 95% financing on condos – owner occupied; 90% – second home; condo must be Fannie Mae approved or it requires a full review; 75% financing on non-approved condos
  • 70% financing for Foreign Nationals – purchase or refinance; delayed financing available – if you just paid cash for a property you can turn right around and pull the money back out.
  • Gifts allowed – 95% conventional loans allow the entire down payment to be a gift  and same with FHA; gifts must be from an immediate family member
  • 100% financing on VA loans – Can be 2 years out of a foreclosure, short sale or bankruptcy and still qualify.  Rates are lower than conventional rates and no mortgage insurance! The VA refinance program allows Veterans to refinance without an appraisal and no income or assets need to be shown.  Incredible program!

If you have any questions about this topic please do not hesitate to contact me. To learn more about our company and mortgage products, please feel free to call Dan Longman, President of Priority Lending Corp, at 954-438-3776 ext.11 or email me at prioritydan@bellsouth.net. Visit us online at www.prioritylendingcorp.com 

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