The Mortgage Rates for a 5 Year adjustable rate mortgage (ARM) sank to 4% (and lower in some cases)* yesterday for Bay Area homes. Freddie Mac average rates released on yesterday reported 5 Year ARM at 4.27% at 0.6 points. But the rate improvements later in the day has opened up great opportunities for home owners and First Time Home Buyers. This could be great news if:
- You already own a home but plan to move out by 2016.
- You are a First-Time Home buyer and would like to move up in next 5-6 years.
- You plan to pay off or substantially pay down your mortgage in the next 5 years.
Assumption for the chart: 30 Year Fixed rate at 5.25% and the 5 Year ARM at 4%.
On a 5 Year ARM loan, the rate remains fixed for first 5 years and may adjust after that to a higher rate. In the chart above you could save more than $16,000 in next 5 years on a $417,000 balance even after accounting for a small closing cost to refinance. On a $700,000 balance that number is a whopping $28,000 and for $300,000 it is $12,000. There are no cost refinances available as well.
Don’t get me wrong. 30 Year Fixed rate is still a great option if you want a stable rate mortgage and plan to live in the house for a longer term. And the 30 year fixed rate continues to be at a historically lowest levels in low 5s.
Call me at 408.905.6261 or email me at shashank@arcuslending.com if you would like a free evaluation of your mortgage to see if an ARM loan is right for you. Since I am a mortgage broker approved with more than 100 lenders, I can shop for the best rates for you.
* The rates are subjected to change any time without notice. Credit, Income, Equity and other eligibility required to qualify.
Related Post - Rates set to go up after March 2010
Some major changes went into effect today for FHA loans on San Jose & rest of the Bay Area Condominiums.
I. Elimination of “Spot Loan” Approval Process
If a condo project was not approved by FHA, a “spot approval” was allowed just for financing one unit. This process has been eliminated as of today. Now the entire project has to be approved either directly by HUD (process called HRAP) or by a Direct Endorsed Lender (process called DELRAP). With all the liabilities involved around the process most of the direct endorsed lenders would prefer HUD to directly approve the project. This can cause major delays at 2 ends:
- Collecting all the required documents from Home Owner’s association (HOA)
- HUD’s review of those documents to approve/reject the project
Dont be surprised if FHA loans on un-approved condominium projects take 60 days or more to close at least till the time HUD comes up with faster turn times or a more efficient process.
II. FHA Concentration Requirements
- The FHA concentration (Percentage of units which has FHA loans in a project) requirement will be increased temporarily to 50 percent.
- Exceptions to 50 percent Concentration Level - The FHA concentration may be increased up to 100 percent if the project meets all of the basic condominium standards plus some of the additional items.
III. Owner-Occupancy Requirements
- At least 50 percent of the units in a project must be owner-occupied or sold to owners who intend to occupy the units. For proposed, under construction, or projects still in their initial marketing period, FHA will allow a minimum owner occupancy amount equal to 50 percent of the number of presold units.
- Vacant or tenant-occupied real estate owned (REOs), including properties that are bank owned, may be excluded from the calculation of the required owner-occupancy percentage (should be removed from both the numerator and denominator).
IV. Pre-Sale Requirements
- In the case of new construction, the pre-sale requirement will be reduced temporarily to 30 percent.
As of today, 45 condominium projects are approved in San Jose. If you are a buyer or a seller and would like to know if a certain project is approved or not, call me at 408.905.6261 or email me at Shashank@ArcusLending.com
Also read - FHA is changing guidelines for condominiums
Your weekly dose of San Jose Mortgage Rates and Market commentary.
The Week that was:
- Freddie Mac reported in its Primary Mortgage Market Survey® that 30-year fixed-rate mortgage (FRM) averaged 4.98 percent with an average 0.6 point for the week ending January 28, 2010, down slightly from last week when it averaged 4.99 percent. The 5 year adjustable-rate mortgage (ARM) averaged 4.25 percent this week, with an average 0.6 point, down from last week when it averaged 4.27 percent.
- Q4 advance GDP was stronger than expected at +5.7% but will likely be revised lower when we get the preliminary revision next month.
- Treasury once again was able to get strong demand for $118B of notes sold last week.
- In my humble opinion, Obama’s State of the Union speech was more fluff than substance in the aftermath of voter rebellion in Massachusetts; cost cutting and more job growth help but not specifics.
The Week that will be:
- This is going to be employment week with Jan data coming on Friday.
- No Treasury borrowing this week, however, on Wednesday Treasury will announce the following week’s auctions for 3 yr notes, 10 yr notes and 30 yr bonds; likely about $80B in total.
Market volatility this week will likely be up a little with interday swings that will keep markets in check until the employment data on Friday morning.
If you are in the market to buy or refinance a San Jose home and want to find out how economy news can affect your mortgage rates call me at 408.905.6261 or email me shashank@arcuslending.com.
Some other related posts on Mortgage Rates - http://lendingexpertblog.com/blogs/?cat=44
The Fed’s statement today does not augur well for Bay Area Mortgage Rates. The Fed’s policy-setting committee stuck to a plan to end its purchases of mortgage securities by the end of March.
Background - The program to purchase agency mortgage-backed securities (agency MBS) was announced by the Federal Reserve on November 25, 2008. On Wednesday, March 18, the FOMC announced the expansion of the Federal Reserve’s program to purchase agency MBS up to $1.25 trillion by the end of the year. On September 23, 2009, the FOMC announced that the Federal Reserve will purchase a total of $1.25 trillion of agency mortgage-backed securities and gradually slow the pace of these purchases, anticipating they will be executed by the end of the first quarter of 2010.
The purchases have helped to drive down mortgage interest rates (refer chart below for Mortgage Rates in the last decade. Source - Freddie Mac), providing an important boost to U.S. housing and financial markets. When the Fed stops buying,
rates on mortgages could turn higher. According to Fannie Mae chief economist Doug Duncan Mortgage Rates can go up
by 30 to 50 basis points if Fed stops buying Mortgage Backed Securities. In fact, immediately after Federal Open Market Committee (FOMC) Statement today, most of the lenders issued a repricing for worse. For a $500,000 an increase in 50 bps in rate means an increase of $155 a month on a
San Jose home mortgage payment.
In its meeting in December, some Fed officials argued the housing market might not be ready for an end to the MBS purchase plan and suggested keeping it in place for a longer period or even expanding it. With Fed now saying the economy had “continued to strengthen” and business spending was “picking up” ; it is trying to gradually pull back from the many programs initiated between 2007 and 2009 to stabilize the financial system and lift the economy.
So if you were planning to take a mortgage either to refinance or buy a home, time could be running out for low mortgage rates. Call me today at 408.905.6261 or email me at shashank@arcuslending.com and let me shop 100+ lenders for you to get you the best Bay Area Mortgage Rates.
Your weekly dose of San Jose Mortgage Rates and Market commentary.
The week that was:
- Freddie Mac reported in its Primary Mortgage Market Survey® that 30-year fixed-rate mortgage averaged 4.99 percent with an average 0.7 point for the week ending January 21, 2010, down from last week when it averaged 5.06 percent. The 5-year adjustable-rate mortgage (ARM) averaged 4.27 percent this week, with an average 0.6 point, down from last week when it averaged 4.32 percent. Note that these averages are for conforming loan amounts $417,000 and lower.
- Wall Street Journal reported that California’s inventory of unsold, previously owned homes shrank to a five-year low in December, in another sign that the state may be coming out of its worst housing slump in decades. The supply of unsold single-family homes dropped to 3.8 months from 5.6 months a year ago and 16.6 months in January 2008. The inventory levels are now at their lowest level since 2005, resulting in frenzied sales with multiple offers in some cities. In Santa Clara County, inventory has dropped to 50 days from 243 a year ago.
- One of the most surprising developments last week was the way the Senate is back-peddling the confirmation of Ben Bernanke for his second term. Greenspan, Paul Volker, Warren Buffett, most former Fed officials; and last but not least, investors want Bernanke confirmed but now its populist movement for weak minded politicians that are increasingly worried they too may be tossed on the unemployed rolls in Nov that has weakened Bernanke support.
Read more..
FHA announced a series of changes to their Down Payment, Credit Score, Seller Contribution and Mortgage Insurance guidelines.
Credit Score/DownPayment Guideline Change :
- New borrowers will now be required to have a minimum FICO score of 580 to qualify for FHA’s 3.5% down payment program. New borrowers with less than a 580 FICO score will be required to put down at least 10%.
- This change will be posted in the Federal Register in February and, after a notice and comment period, would go into effect in the early summer.
Effect of this change - This will have minimal to no impact on Bay Area First Time Home Buyers. Almost all the lenders already have a self-imposed 620 minimum credit score guideline. Some even require a 640 minimum score.
Reduce allowable seller concessions from 6% to 3%
- According to FHA - The current level exposes the FHA to excess risk by creating incentives to inflate appraised value. This change will bring FHA into conformity with industry standards on seller concessions.
- This change will be posted in the Federal Register in February, and after a notice and comment period, would go into effect in the early summer.
Effect of this change - Because of low inventory and the risk of not getting the property appraised at contract price seller have already reduced their contribution on transactions. In my personal opinion, 3% is still good enough to cover for most of the Buyer’s closing cost, if not all. Again, this rule too will have a minor impact for San Francisco Bay Area First Time Home Buyers who are considering FHA as their loan option.
Read my another post about changes to FHA Mortgage Insurance
If you would like to know how these changes to FHA loan requirements would impact you, feel free to call me at 408.905.6261 or email me at shashank@arcuslending.com
FHA today increased it’s upfront mortgage insurance premium requirements for Bay Area FHA Home Loans. Upfront Mortgage Insurance is the money that FHA collects at the time of closing a mortgage to insure the loan against default. Currently, this premium is 1.75% for most purchase and refinance transactions. However, effective April 5, 2010, FHA will collect an upfront mortgage insurance premium of 2.25 percent for purchase money and refinance transactions, including FHA-to-FHA streamlined refinance transactions. Below is the breakdown of FHA upfront mortgage insurance for different loan programs:
- Purchase Money Mortgages and Full-Credit Qualifying Refinances = 2.25 percent
- Streamline Refinances (all types) = 2.25 percent
- HOPE for Homeowners (Delinquent Mortgagors) = 2.00 percent
- Home Equity Conversion Mortgages (Also called Reverse Mortgages) = 2.00 percent
As a borrower, it means higher cost for you to take an FHA loan. However, FHA allows upfront mortgage insurance premium to be added to the loan amount. Hence the change in the policy wouldnt necessarily mean larger “cash to close” requirement.
Read more..
Weekly dose of economy and mortgage market news that affects mortgage rates for San Jose Home buyers and Home owners.
The Week that was:
- Economic data last week confirmed once again that inflation fears are way overblown; Dec CPI up just 0.1%. Factory use and industrial production improved again as the economy is bottoming, at least based on recent reports. Somewhat disturbing, and adding to last week’s bounce in rates; Dec retail sales were lower, down 0.3% in a month.
- Consumers, the housing industry and the unemployment rate, now at a whopping 17% when discouraged workers are taken into account; not the building blocks for a sustained recovery.
- Freddie Mac weekly Primary Mortgage Market Survey® reported 30-year fixed-rate mortgage (FRM) averaged 5.06 percent with an average 0.7 point for the week ending January 14, 2010, down from last week when it averaged 5.09 percent. Last year at this time, the 30-year FRM averaged 4.96 percent.
- The 5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 4.32 percent this week, with an average 0.6 point, down from last week when it averaged 4.44 percent. A year ago, the 5-year ARM averaged 5.25 percent.
The Week that will be:
- Not much in the way of economic measurements this week; Dec housing starts and building permits and the Dec producer price index, prices on wholesale products, are the headliners this week.
- As long as the outlook for economic recovery remains as solid as it is currently lower rates are highly unlikely. We suggest taking advantage of any further decline in rates.
Great news for First Time Home Buyers - FHA is eliminating the 90 day flipping rule for mortgages on San Francisco (SF) Bay Area homes. With certain exceptions, FHA currently prohibits insuring a mortgage on a home owned by the seller for less than 90 days. Currently such homes are mostly bought by investors with large down payments or an all cash transaction. Due to lack of financing options Bay Area First Time Home Buyers were not able to make offers on such homes.
This temporary waiver will give FHA borrowers access to a broader array of recently foreclosed properties. The policy change will permit buyers to use FHA-insured financing to purchase HUD-owned properties, bank-owned properties, or properties resold through private sales. This will allow homes to resell as quickly as possible, helping to stabilize real estate prices and to revitalize neighborhoods and communities.
HUD Secretary Shaun Donovan said - “As a result of the tightened credit market, FHA-insured mortgage financing is often the only means of financing available to potential homebuyers. FHA has an unprecedented opportunity to fulfill its mission by helping many homebuyers find affordable housing while contributing to neighborhood stabilization.”
Read more..
In the final state of the state address of his gubernatorial career, Gov. Arnold Schwarzenegger proposed a second round of $10,000 first time home buyer tax credit. The previous tax credit depleted eight months before the deadline after benefiting almost 10,700 California home buyers. The Franchise Tax Board stopped taking new applications at the start of July, 2009.
What this means is if this proposal is indeed passed California First Time Home Buyers can potentially get $18,000 in Tax credits.
At a press conference in Fresno this is what the Governor has to say about the proposed Tax Credit: Altogether we want to put aside $200 million for these tax credits. Right now the inventory of new homes is at the lowest it has been since 1971 and that means, of course, now we create demand to build new homes and that’s exactly what we want to do. We want to get people off the fence and move them into homes.
Tax credit proposal if passed will have following highlights:
- The Governor plans to set aside $200 million, twice the amount set aside last year. The credit will be offered on a first come first served basis till the fund is exhausted.
- The tax credit will apply to buyers of new & existing homes. The last credit was only applicable to new homes.
- The tax credit will be available only to first time home buyers.
- The tax credit will be $10,000 or 5% of the purchase price whichever is lower.
Combined with historical low interest rates and 30%-40% dip in property prices, this could be once in a lifetime opportunity for a First Time Home Buyer to buy a home in California.
If you were considering buying your first home, contact me at 408.905.6261 or shashank@arcuslending.com and I will be glad to help you with your financing needs.
After more than 4 years of discussions with various trade and consumer groups, HUD implemented the new Good Faith Estimate (GFE) on January 1, 2010 for San Francisco (SF) Bay Area borrowers. The goal was greater clarity and transparency for borrowers. I do not want to get into the details of every single field of this 3 page document, and make this a 10 page post. I would rather write about what I like about the New Good Faith Estimate form and what I don’t like. Here we go!
Things I like:
- All origination charges lumped together- Now loan officers wont be able to sneak in an extra couple of hundred dollars under some junk fees e.g. Application Fee, Admin Fee etc.
- Is more detailed & Explains all the fees
- Tradeoff Table - Gives 3 different scenarios and compares the the loan quoted in the GFE to the same loan with lower closing cost but higher rate and the same loan with higher rate but lower closing cost. This gives the borrower to pick the best option based on his/her situation.
- Gives a snapshot of loan with important dates - Under “Summary of the loan” section on page 1, the borrower can get answers to most of the questions regarding the new loan.
- Easier comparison of loan offers - The new GFE guides the borrowers on the factors against which to shop and compare loan offers. Surprisingly however, closing cost is not mentioned as one of the factors.
Read more..
Your weekly dose of economy and mortgage market news that affects mortgage rates for San Jose Home Home owners and buyers.
The Week that was:
Another bad week for the bond and mortgage markets. The 10 yr treasury note and mortgage rates have now increased 60 basis points in the past three weeks.
- Freddie Mac reported in its Primary Mortgage Market Survey® (PMMS®) that 30-year fixed-rate mortgage (FRM) averaged 5.14 percent with an average 0.7 point for the week ending December 31, 2009, up from last week when it averaged 5.05 percent. The 5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 4.44 percent this week, with an average 0.6 point, up from last week when it averaged 4.40 percent. A year ago, the 5-year ARM averaged 5.57 percent.
- Nationally, the housing market is slowly improving. House prices rose for the fifth consecutive month in October to the highest level since the beginning of 2009, according to the S&P/Case-Shiller® 20-city composite index . Eleven of the cities experienced positive growth.
Read more..
In last 3 weeks, 30 year fixed mortgage rates have gone up 34 basis points for San Francisco (SF) Bay Area homes.
In the latest results of its Primary Mortgage Market Survey® Freddie Mac reported 30-year fixed-rate mortgage averaged 5.05 percent with an average 0.7 point for the week ending December 24, 2009. The 15-year Fixed Rate this week averaged 4.45 percent with an average 0.6 point. The 5-year adjustable-rate mortgage (ARM) averaged 4.40 percent this week.
These rates are for conforming loan amount $417,000 and lower. Higher loan amounts come with higher interest rates.
The rates through 2009 have been artificially kept lower by Fed by buying Mortgage Backed Securities (MBS). Fed is planning to stop buying MBS in March 2010 and if they actually decide to do so, mortgage rates could go up 25 bps to 50 bps almost overnight. No surprise that the average rates are projected to go beyond 6% by the end of the year.
If you are still on the fence to refinance your Bay Area Home Mortgage, the window for low rates could be short. If you are looking for a Bay Area Mortgage Broker who could shop more than 100 lenders to get you the best mortgage interest rate, call me at 408.905.6261.
FHA’s Energy Efficient Mortgage program (EEM) helps San Francisco (SF) Bay Area homebuyers or homeowners save money on utility bills. This is done by enabling them to finance the cost of adding energy efficiency features to their house as part of their FHA insured loan.
EEMs recognize that reduced utility expenses can permit a homeowner to pay a higher mortgage to cover the cost of the energy improvements on top of the approved mortgage. FHA EEMs provide mortgage insurance for a person to purchase or refinance a principal residence and incorporate the cost of energy efficient improvements into the mortgage. The borrower does not have to qualify for the additional money and does not make a downpayment on it.
Eligible Activities:
EEM can be used to make energy efficient improvements in one to four unit existing and new homes. The improvements can be included in a borrower’s mortgage only if their total cost is less than the total dollar value of the energy that will be saved during their useful life.
The cost of the energy improvements and estimate of the energy savings must be determined by a home energy rating report that is prepared by an energy consultant using a Home Energy Rating System (HERS). The cost of the energy rating report and inspections may be financed as part of the cost effective energy package.
The energy improvements are installed after the loan closes. The lender will place the money in an escrow account. The money will be released to the borrower after an inspection verifies that the improvements are installed and the energy savings will be achieved.
If you are looking for an FHA approved lender in Bay Area who could offer more information on FHA EEM program and other loan programs, please contact me at shashank@arcuslending.com
FHA delays HVCC for San Francisco (SF) Bay Area Home Loans until February 15, 2010. FHA announced today that the enactment of Appraiser Independence has been delayed. This was originally planned for a January 1, 2010 implementation.
On the lines of HVCC, the FHA policy prohibits mortgage brokers and commission-based lender staff from the ordering the appraisal or communicating directly with the appraiser at any stage during the transaction. Since implementation of the Home Valuation Code of Conduct (HVCC) for conventional loans in May 2009, many challenges and difficulties with appraisals have been reported, such as low appraisals, inexperienced appraisers, out-of-area appraisers unfamiliar with a local neighborhood, and problems with Appraisal Management Companies (AMCs).
Bay Area first time home buyers who are planning to avail of FHA home loan would definitely welcome this move. HVCC moratorium bill is also being considered by the congress. If passed, this bill will provide a moratorium on HVCC for 18 months.
If you are a First Time Home Buyer in Bay Area looking for an FHA purchase loan you may like to start the process before February 15th to avoid getting into the HVCC hassle. Contact me to find out what are the loan requirements for an FHA Loan in Bay Area.
Related Post - FHA implementing HVCC
Shashank is the author of the blog. He is a mortgage broker/banker in San Jose , CA specializing in First Time Home Buyer and FHA Loans. He can be reached at info@arcuslending.com or 408.905.6261.