The summer is traditionally the time when most educators look for homes, so I wanted to make some comments on the current situation in light of the financial "credit crunch" that has been happening.
First, the mortgage industry has changed dramatically in the past year, and it has definitely become more stringent for those that want to get a mortgage.
Recently, a friend went to go get a mortgage to purchase a house. He put down 10%, and in the past, he could have an 80-10 loan, but not anymore. He was offered a 90% loan with PMI due monthly and mandatory escrows with a year of escrows due at closing.
This is a huge change from two years ago. The industry went from begging people who could not afford it to take their money (pendulum swings), to making low risk people jump through hoops to get it (pendulum swings back).
His result was a good closing on a good house, but the free money era has ended… for a while until the pendulum swings back again.
Be conservative in what you are looking for and how much you believe that your home will appreciate. Just because someone says that this home will go up 10% a year does not mean it will.
Mortgage rates are still at historic lows, but the current threat of inflation has them on the rise. This does not mean that you need to run out and buy a home before they hit 8%, but it also does not mean that they will get to 7% and come back down immediately.
The Fed targets short term rates (and inflation). If you hear the Fed could be raising rates, this could be a positive for the mortgage rates. Just talk with your loan officer, and if they are any good, they should be able to give you some guidance and advice.
First, the mortgage industry has changed dramatically in the past year, and it has definitely become more stringent for those that want to get a mortgage.
Recently, a friend went to go get a mortgage to purchase a house. He put down 10%, and in the past, he could have an 80-10 loan, but not anymore. He was offered a 90% loan with PMI due monthly and mandatory escrows with a year of escrows due at closing.
This is a huge change from two years ago. The industry went from begging people who could not afford it to take their money (pendulum swings), to making low risk people jump through hoops to get it (pendulum swings back).
His result was a good closing on a good house, but the free money era has ended… for a while until the pendulum swings back again.
Be conservative in what you are looking for and how much you believe that your home will appreciate. Just because someone says that this home will go up 10% a year does not mean it will.
Mortgage rates are still at historic lows, but the current threat of inflation has them on the rise. This does not mean that you need to run out and buy a home before they hit 8%, but it also does not mean that they will get to 7% and come back down immediately.
The Fed targets short term rates (and inflation). If you hear the Fed could be raising rates, this could be a positive for the mortgage rates. Just talk with your loan officer, and if they are any good, they should be able to give you some guidance and advice.
No comments:
Post a Comment