Time to be aware that you will start seeing yet another, group of changes in the mortgage industry.
Starting this fall with Fannie & Freddie, lowering of the conforming loan amounts. Orange County & LA County, word has it, will have a maximum of $625,500 no longer the $729,750 loan amount. Underwriting income ratios for Freddie (to date, Fannie may follow) are going to tighten. This will make it more difficult to qualify the debt borrowers carry. Good reason to be aware of mortgage industry changes.
The good news is that the MI (mortgage insurance) Companies will take on higher loan to values. Not so good news is that the cost factors for MI are high, which a borrower will have to pay on a monthly basis either by way of an additional cost added to the loan amount or they can choose to take a higher interest rate (called LPMI, Lender Paid Mortgage Insurance). In some cases choosing the higher rate will be a lower total monthly mortgage payment, believe it or not. Another reason to be aware of mortgage industry changes.
One thing to remember is that if you can STILL qualify with adding the MI to the monthly payment it will eventually drop off, once your home value increases and the loan to value will be 80% or less. How soon that will happen nobody knows, but from the looks of it we would be safe in a 5 year or 7 year or 10 year fixed loans. These come with very attractive rates starting at about 2.75% for a 5 year fixed with a 1 year arm through the 30th year.
All and all we can thank the Dodd - Frank Act for keeping us all scrambling and tightening our budgets on a daily basis. At least it keeps us thinking and performing math calculations as we never have before. Remember there is good reason to be aware of the mortgage industry changes for this will effect not only qualifying borrowers but it could be the last time you can make a sale to that buyer in a certain price range due to the mortgage loan limits changes coming this fall.