There have been a lot of recent changes in mortgage lending and as a result, there are a variety of new opportunities for potential borrowers. The following is a guest post by Michaela Phillips, highlighting some of these major changes and what they mean for you.
In the recent months, we’ve seen some new developments in the world of mortgage loans. Thanks to a decrease in mortgage insurance rates, as well as lenders loosening up on their lending criteria, there are many new opportunities for loan borrowers. Whether you’re a potential homebuyer or current homeowner considering refinancing, these changes may offer savings on your mortgage.
The biggest new development in the business is Fannie Mae and Freddie Mac lowering their minimum down payment requirements. These two government-sponsored mortgage corporations are offering new incentives for potential homeowners to buy and take out a loan now. Qualified first-time homebuyers can take out a mortgage loan with a down payment as low as 3% of the entire purchase price.
The move to lower down payment rates by Fannie Mae and Freddie Mac directly affects the Federal Housing Administration (FHA). The FHA offers mortgage insurance on loans from approved lenders but hasn’t felt fierce competition from Fannie Mae and Freddie Mac until recently. In order not to lose its share in the market, the FHA very recently lowered its annual mortgage premiums from 1.35% down to just .85%. These premium cuts may encourage new qualified buyers to finally become homeowners.
Along with the lowering of down payments and premium rates, mortgage lenders are also loosening their lending guidelines. Many banks and credit unions are lowering the FICO credit score necessary to qualify for another mortgage loan. For a long time, borrowers needed a score above 720 to be approved for a second or third mortgage, but now many lenders are lowering that score.
Beyond credit scores, lenders are also relaxing on their second mortgage or home equity policies. During the housing market crash several years ago, second mortgage lenders took a big financial hit with foreclosures. With a home foreclosure, first mortgage lenders were paid back first, which left second mortgage lenders unable to get their money back in full. After the housing crash, banks and credit unions became stricter with their second mortgage programs by lending out less money to borrowers. But slowly, as the housing market becomes more stable, lenders are beginning to give out higher loans, some even allowing borrowers to get up to 90% of the value of their home.
With lenders loosening their policies and offering lower rates, more people can now afford to become homeowners. Thanks to these new loan opportunities, we may begin to see a surge of new buyers in the housing market. If you need more information or have questions about these recent changes, please don’t hesitate to contact me: michaela@michaelaphillips.com.
About the Author: Michaela Phillips entered the mortgage lending industry in 1994. Throughout her 20 years in the business she’s been one of the top producers for every company she’s worked for. As of late 2013, she’s the VP of Mortgage Lending for Guaranteed Rate, Inc., the 8th largest retail mortgage company in the country. Being a VP at Guaranteed Rate offers many advantages to her and her clients, unparalleled customer service, efficiency, and most importantly, competitive rates.
She enjoys teaching her clients the pros and cons of being a Real Estate Investor, and more so, watching them build their Real Estate “Empires,” large or small, but all successful. NMLS: 312874