Hello and Happy New Year!!!
Well let’s first talk about rates in 2015 and review. And this is pretty simple from 1/1/2015 to 12/31/2015, rates changed by a whole .125%!
Yep, only 1/8 of a point for the whole stinking year, with rates highs around 4.375 and rates lows around 3.50%, so there was a pretty big spread, but when all was settled rates on 12/31/2015 were only .125% higher than rates on 1/1/2015.
Now let’s talk about this year! Well with the Federal Reserve increasing the Fed Funds rate in December, it was anticipated that we would see a slow, but gradual increase in rates throughout 2016. With the betters indicating that the Fed Funds rate would be 1.375% by end of 2016. Thus meaning that mortgage rates would be in the 5.00%’s.
That was until the world economy decided to collapse, and it all started with China. Over the last 4 days the news out of China, the 2nd largest economy in the world, has been not so good. With indications of a significant slowdown, and the communist economy putting restrictions on Stock Trading.
This has caused concern in the rest of the world, thus the crash of 2016 has begun. At last report, over $1.6TRILLION has been lost out of the US Stock Market, people are panicking and selling. But where is the money going, Bonds! And the more people that buy bonds the lower interest rate go.
The week has been very good for mortgage rates, as you can see below in the chart, we are seeing some of the best levels of mortgage rates since December 1st. I have also put the 100 day moving average line on the chart, which is significant. If we close above that, say for a couple of days, we could see rate fall back out of the 4’s and into the high 3’s.
I wouldn’t lock a rate right now, atleast until China figures it out and the market starts to calm down. Although we are due for a correction, it will be pretty minor.
Loan Fraud
At my closing today, the subject was all about how hard it is getting a loan, and all the loops you have to go through to prove stuff, like tax returns, bank statements, paycheck stubs, Verification of Employment, etc…
And the borrower indicated that when they bought their home in 1998, this was unheard of, well the questions is why this happened, and below is a pretty good article on a recent case of mortgage fraud and the reason why we have to do so much verification: http://www.justice.gov/usao-ri/pr/six-indicted-alleged-mortgage-fraud-bank-fraud-identity-theft-scheme
FHA and Low FICO Scores
It was brought to my attention, that Realtors are not aware that FHA will actually go down to a 500 FICO score for home purchases.
Yes, FHA will allow a person with a 530 FICO score to get a home loan, but there is quite a bit of hoops to jump through.
12- 24 month rental history
No new derogatory or late payments in the last 12 months.
10% down requirement, if FICO is >580 only 3.5% down.
Collection paid off or down.
Debt to Income restricted to 38%.
Moral of this story, just because someone has bad credit, doesn’t mean they are not a potential home owner.
Lead Generator
Re-hashing a oldie gut goodie: HUD-1 Statements.
How nice would it be for you, as a realtor, to send all of your clients that closed a home in 2015, a copy of their HUD-1 with a nice little letter that say here is a copy of your HUD-1 for your Accountant/CPA to see if anything is tax deductible!
And then close the letter with something asking for the business and attached 2-3 business cards! Golden!