Mortgage News

Are you considering buying a home in the near future?

Tougher rules have been placed on banks all throughout the country this month, and this is only the start. The rollout will continue until March. What do the tougher lending rules mean, and how will they affect the average American looking to purchase a home with a mortgage loan? Keep reading for those answers and more.

What Do the Tougher Lending Rules Mean?

Fannie Mae and Freddie Mac announced new guidelines last month that, along with the new federal rules going in effect, could mean rigid penalties.
These guidelines will impose stiff fines on banks that write unconventional mortgages that later go bad.

How Does This Affect the Average American Looking to Purchase?

Fannie Mae and Freddie Mac do not offer or originate new mortgages. Instead, according to Time Business & Money, “they buy about two-thirds of the conventional mortgages that banks underwrite.”

What this all means is that the bank down the street is going to have even less ability to work with the average American Joe on his mortgage rate. If “average Joe” has a low credit score and a low down payment, the cost of the mortgage is likely to rise.

Where Will the Average American See the Cost Spike?

The average American will see a higher percentage rate for a mortgage. While it may seem like the difference between 4.5% and 5% isn’t significant, it actually means the difference of $21,697 over the length of a 30-year loan.

According to Time Business & Money,

    Fannie and Freddie have a floating grid of cost hikes for borrowers up and down the credit spectrum and for those with down payments below 20%. For example, a borrower seeking a 30-year fixed-rate mortgage with a credit score of 735 and making a 10% down payment would pay about .4 percentage points more—4.9% instead of 4.5%. A bigger down payment would help but even with 25% down a borrower with a credit score below 760 would pay a premium rate.

Mortgage Rates on the Rise

Last week, Yahoo Finance reported that we are already seeing a rise in mortgage rates. The rise is slight, but a rise nonetheless. These numbers were published on the 7th of January:

  • 30-Year-Mortgages:  4.39% versus the 4.38% we saw the week before.
  • 15-Year Mortgages: 3.35%
  • 5/1 ARM: 2.85%

While January isn’t normally the month that Michiganders move, it might be the perfect time to consider moving, especially if you have lower credit.

Are considering buying a home this winter? Please read our article, 3 Secrets to Why You Should Buy a Home This Winter.

If you would like to start looking for a home that is the perfect fit for you, please give our office a call. We would love to help assist you in getting into the home of your dreams.