NW Indiana Loan Guy Blog

I found the following in an Associated Press article on March 18, 2009. Let’s look at it and break it down a little….

WASHINGTON – If you’ve got a good job, solid credit and your home’s value hasn’t fallen dramatically, you’re likely to benefit from the Federal Reserve’s extraordinary action Wednesday to help drive mortgage rates to historic lows and revive the U.S. housing market.

The Fed’s plan to buy up to $300 billion of long-term government bonds and $750 billion in additional mortgage-backed securities guaranteed by Fannie Mae and Freddie Mac, should benefit many — but not all — borrowers.

It’s likely to produce a big drop in mortgage rates. Analysts expect rates will fall 0.25 to 0.5 percentage points as soon as Thursday.

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If you have a good job, solid credit and your home’s value hasn’t fallen dramatically…..

Unfortunately, a lot of people are not so lucky with the increasing unemployment numbers and financial hardships that many are going through. Even the value of the home, once thought to always increase at various rates, has fallen due to local foreclosures, among other things.

The Fed’s plan… should benefit many – but not all – borrowers.

For those in foreclosure, it may be too late. For those who have faithfully been paying their mortgage, but have delinquent credit cards and other obligations may have (will have) poor credit scores that could prevent a refinance.

Analysts expect rates will fall 0.25 to 0.5 percentage points as soon as Thursday.

On Wednesday, as I write this, the rates have decreased anywhere from .125% to .25% during the day. It would be foolish to think that the lenders would allow rates to drop too low. I say this for two reasons….

1. The rate that the lending banks and institutions pay to borrow the money that they use to lend is already very low. They are keeping the rates somewhat high to increase their bottom line after some major losses.

2. Many of the lenders have terminated employees and are running short staffed. Decreasing the rates would make them even busier and could force then to hire people back. The question is how long this will last before they would have to cut back again. The existing employees are working very hard, but the brokers and borrowers are experiencing long delays in many cases. For instance, one lender that we use is now reporting that it takes MORE than ONE MONTH from the time we submit the file until an underwriter first looks at it. AMAZING!

Here are my suggestions to my faithful readers. First, disregard all the garbage you hear about needing 750 credit scores and 20% equity. That is pure crapola. We are writing FHA loans with credit scores above 620 and very high loan-to-value levels. Second, get current with all your bills if possible. After that, we can go back and see if we can get the negative information from your credit report removed to increase your scores.

Last, but certainly not least, DO NOT try to time the market! Saying that you want to wait until the rate drops another 1/8 or 1/4 may cause you to lose out on the great rates we are seeing now. Is it a gamble? Sure! However, saving that much on a $150,000 loan would decrease your payments about $9 and $20 a month respectively. If you miss locking at these current rates, it could easily cost more than what you would save.

As always, please contact me if you have questions.

Scott Swinford, your Northwest Indiana Loan Guy

Your source for Indiana FHA loans, Indiana FHA 203(k) Streamline loans, Indiana USDA Rural Development loans, and much more.

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Original article found at http://www.msnbc.msn.com/id/29763390/

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