As predicted, the Fed lowering short term rates on March 18 has had an adverse effect on long term rates. Risk based pricing efforts have increased among lenders as they are going to extreme lengths to reduce the likelihood of new loans going into default. It is far more difficult to get the best rates than it was only a month ago. Mortgage insurance companies are in the process of changing their criteria as well. Buyers can expect to have a difficult time obtaining mortgage insurance on conventional loans with a credit score below 620 and most 100% loan programs will require at least a 660 score.
As the market continues to search for its bottom, there are indicators that point to a gradual recovery. Consumers are now aware that the days of no doc or stated income loans are pretty much a thing of the past. Most buyers are now coming in with paystubs and tax returns when they apply, to insure that the get the lowest possible rates. Rates are still well below historical averages. Inventory is leveling off. Sellers and buyers expectations are converging. All good things.
A topic of discussion at a meeting this week pointed out that consumers should be more concerned about rates rising as opposed to prices dropping. A $200,000 loan at 5.5% will have a principal and interest cost of $1136 on a 30 year fixed rate Florida mortgage. A $190,000 loan at 6.0 % will cost $1139. Rates moved up about .5% in the last week, and will likely continue to fluctuate. A buyer that is hoping for prices to continue to drop, may lose out in the end if rates increase.
Written By Ron Wysocarski 386-562-2651