In this blog:  Rates continue to slide, source and seasoning of assets, and FHA mortgae down to 500 FICO!

Mortgage Rates

Mortgage Rates saw a nice improvement this week, not huge, but nice.  Mainly due to Trump and his mouth.  There is a greater feeling among traders that Trump could be the first 4 year lame duck president in modern times.  Meaning he isn’t going to get anything passed on his agenda because the Democrats hate him and more and more Republicans are starting to side with the Democrats.

Economically this week, we say some pretty good economic reports:

•      New home sales, 571K vs 612K, this was weaker, but not because people are not buying, they just can’t find homes.
•      Weekly Jobless Claims 234,000 vs est. of $238,000.  Jobless Claims keep falling and falling, still showing the US economy has legs.
•      Existing Home Sales 5.44M vs est. of 5.57M, once again, weaker number by 13,000 sales, but again, people can’t find homes in this housing shortage.
•      Finally Durable Good orders, one to really watch on any hints of a recession, along with jobs, +.5% vs est. of +.4%.  These are items that last more than 3 years, say a refrigerator or TV.  These show the US consumer is still buying these items.  During a recession, people tend not to buy these items and “make due” with what they have.

Rates are pretty darn nice, and with all of the Federal Reserve governors speaking this week, it is anticipated that rates will continue to stay low for a while.  What could spike rates higher, Trump shutting his mouth and twitter, and Congress passing a Tax Reform Bill.

Source and Seasoning of Assets

So, you have been in a transaction, where the borrowers are placing a down payment.  And the lender needs to know where the money came from.  We call that Source and Seasoning of that money.  The main reason for this is a Financial Security Act.  This act was put into place to prevent people from illegally laundering money.

Now most of you say, well my clients are not drug dealers, and you would be right.  But under the act, we have to treat all parties fairly and equally.  So a 1^st time home buyer who is getting $3000 from their little old grandmother to the executive with Simplot who is putting down $500,000 on a $924,000 home all have to be treated the same way.

Source:  We have to know where the money is coming from, and the money has to be coming from a legitimate source, checking, savings, 401K, IRA, money market account.

Seasoning:  How long has the money been there, the rule of thumb is 2 months, but can extend further.

What if a borrower is bringing in a sum of money and it can’t be sourced and seasoned?  Well 2 things have to happen:

1^st we/lender have to decline the use of that money, not necessarily decline the file, but decline the use of that money.

2^nd, we have to fill out a US Department of the Treasury, Bank Secrecy Act, Suspicious Activity Report.  Which basically tells the government all the information about the transaction.

How does a person prevent all of this:

•       Don’t utilize illegally received monies to purchase a home.
•       Ensure that all of your deposits come from legitimate sources.
•       Keep good documentation and records.
•       Be mentally prepared for lender to ask lots of questions and get lots of documentation.
•       Do not blame the lender, we are just doing our jobs as required under a law Congress passed.

New Loan Program:  FHA 500

Well, believe it or not, lenders are now going down to a 500 FICO score on FHA loans, yep you heard me right, 500! 

It will require a minimum of 10% down, rates are in the 4’s, and the debt to income ratio is limited to 38%.  The borrower also needs to also be 2-3 years out of Bankruptcy and Foreclosures.

This is another tool we have to assist people into getting the American Dream, and an opportunity for people with credit challenges to acquire this dream.

Flyer attached here

Link to Web Site here.