Comments on: Friday’s Rates following the Rescue/Bail Out

By: A look at the changes in real-estate lending rates | Eastside Bubble

A look at the changes in real-estate lending rates | Eastside Bubble — Tue, 07 Oct 2008 18:13:45 +0000

[...] Friday’s rates post-bailout rate sheet wasn’t nearly as much fun to read, but it gives you an idea of the [...]

By: Rhonda Porter

Rhonda Porter — Sat, 04 Oct 2008 04:41:58 +0000

Thanks Jillayne. I knew that date was engraved in my brain for some reason!

By: Jillayne Schlicke

Jillayne Schlicke — Sat, 04 Oct 2008 04:16:31 +0000

Ardell/Rhonda: confirmed. Sept 30, 2009. They put a one year moratorium on risk-based pricing for FHA loans.

By: Rhonda Porter

Rhonda Porter — Sat, 04 Oct 2008 02:31:34 +0000

Ardell, I’ll write a post covering all of this… I need to update one that I have here at RCG regarding FHA and mortgage insurance. So much has changed that it’s a real challenge to keep things current! Off the top of my head, I want to say it’s until September 30, 2009 (but I need to verify).

By: ARDELL

ARDELL — Sat, 04 Oct 2008 02:05:52 +0000

“And finally, thanks to HR 3221, FHA has lifted risk based pricing (temporarily), so those with lower credit scores may have better rates with FHA than conventional.”

This is really important for a lot of people. Is there an identifed end date or is it “until further notice”? When did that first become effective?

By: Rhonda Porter

Rhonda Porter — Sat, 04 Oct 2008 01:31:17 +0000

cautious buyer,
with a 750 low mid credit score (if there is more than one borrower, the lowest middle score of the two are used) I would HOPE you could use conventioanl financing with 10 or 15% down. Both FHA and conventional will require 2 years employment history and some assets (beyond down payment).

I do recommend working with mortgage professionals who are FHA approved just in case the conventional approval is not attractive (higher rate due to expanded approval) as I mentioned in comment 6. We were floored by the response from the AUS (automated underwriting ie computer program).

By: cautious buyer

cautious buyer — Sat, 04 Oct 2008 01:24:12 +0000

So noted on FHA, good information.

I know the adjusted rate on an ARM is based on LIBOR, but does LIBOR have a correlation with the initial rate as well?

How high does LTV need to be before FHA starts to make sense, given say a 750 credit score? Might FHA still be better with 10 or 15% down?

By: Roger Ingalls

Roger Ingalls — Sat, 04 Oct 2008 01:10:37 +0000

Ardell:

Yes.

Here’s a fairly concrete example.

95% financing, MI is going to be .78 (usually), while FHA will still be .5.

Another, less concrete example.

For a loan recently, I got an approve eligible in FHA, but a expanded approval, level 4 in conventional making the conventional at least 1% higher in rate.

And finally, thanks to HR 3221, FHA has lifted risk based pricing (temporarily), so those with lower credit scores may have better rates with FHA than conventional.

By: ARDELL

ARDELL — Sat, 04 Oct 2008 00:54:45 +0000

So someone with a credit score of 660 might get a better rate with FHA even though it appears to be higher…is that correct? Conventional rates go up as ratios stretch or credit scores diminish, but FHA rate stays constant?

By: Rhonda Porter

Rhonda Porter — Sat, 04 Oct 2008 00:04:30 +0000

cautious buyer, a majority of ARMS are based on LIBOR (usually 1 year) plus a margin (this is important to determine before locking in–not that you’d select an ARM today!). LIBOR is currently 4.058 (for the 1 yr LIBOR). People with ARMs adjusting now (or in the next year) should really contact their mortgage professional ASAP to review what their rate (index-such as LIBOR + margin = new rate: subject to rate caps).

The ARM rates are most likely higher because of LIBOR rates.

FHA does not fold the mortgage insurance into the rate. The upfront mortgage insurance is usually financed into the loan and monthly mortgage insurance is added to the payment.

I want to be more clear about the inverted yield curve. This is when the 2 year note yield is higher than the 10 year note yield….which is not the case (at this time).

Everything is so whacky with predicting rates in this market–not much would surprise me anymore!