As I've noted in my last post about Beach Cities Home Loans there are going to be major changes in how buyers qualify for a new purchase or to refinance their current loan. Many of these changes are going to create some challenges in the short term but will prove to be smart over the long term.
Tightening of loan underwriting guidelines should make financial markets feel a bit more secure and lead to home mortgage rates stabilizing over the next few months. Home loans are mainly tied to bond rates and tighter guidelines should still have an impact. Yesterday's concern in the stock market over credit woes by subprime lenders was evident as yields on the 10 year Treasury notes fell pushing up bond rates. If lenders can reassure the market that lousy loans are a thing of the past the markets may stabilize a little.
Most Manhattan Beach home buyers and those in the other beach cities of Hermosa Beach, Redondo Beach and El Segundo should not have major problems obtaining a home loan. Our buyers typically have good jobs, excellent credit and money for a down payment. The process may be longer and more arduous but not difficult. The biggest obstacle for homeowners in the Beach Cities will be if they want to refinance after owning a home for a short period of time.
The good news on real estate loans is that the rates are still pretty good. Most of our home buyers are looking at jumbo loans (over $417,000) because of the price of homes in Manhattan Beach, Redondo Beach, Hermosa Beach and El Segundo. Rates on jumbo loans will be higher then those on conforming loans. I suspect rates and points will be a moving target over the next few weeks until the market settles. This is definitely a time to do a locked in rate.
Tightening of loan underwriting guidelines should make financial markets feel a bit more secure and lead to home mortgage rates stabilizing over the next few months. Home loans are mainly tied to bond rates and tighter guidelines should still have an impact. Yesterday's concern in the stock market over credit woes by subprime lenders was evident as yields on the 10 year Treasury notes fell pushing up bond rates. If lenders can reassure the market that lousy loans are a thing of the past the markets may stabilize a little.
Most Manhattan Beach home buyers and those in the other beach cities of Hermosa Beach, Redondo Beach and El Segundo should not have major problems obtaining a home loan. Our buyers typically have good jobs, excellent credit and money for a down payment. The process may be longer and more arduous but not difficult. The biggest obstacle for homeowners in the Beach Cities will be if they want to refinance after owning a home for a short period of time.
The good news on real estate loans is that the rates are still pretty good. Most of our home buyers are looking at jumbo loans (over $417,000) because of the price of homes in Manhattan Beach, Redondo Beach, Hermosa Beach and El Segundo. Rates on jumbo loans will be higher then those on conforming loans. I suspect rates and points will be a moving target over the next few weeks until the market settles. This is definitely a time to do a locked in rate.
Next week will prove interesting as the FED will be meeting amid reports on productivity and reports about the consumer credit situation. Investors will be closely watching this meeting to see what they have to say in light of the current market woes.
The real test of the new guidelines will be for potential home buyers who have made poor credit choices or have not saved much for a down payment. They may have to postpone homeownership until they get their financial house in order. Frankly I think tightening the underwriting rules is a good move. It never made much sense to me to buy a home you couldn't really qualify for so you could watch it go into foreclosure a few years later. You don't have to be a rocket scientist to figure out that one.
Kurt Jackson offers some insight into what is happening behind the scene in The Story Behind the Story.. give it a read to find out more about how the lending world works.. Brian Brady , America's Most Opinioned Mortgage Broker, also offer a series of posts on what has been happening in the market in the last week.. Here is another good explanation on how the mortgage market works from Jeff Belonger.. Explanation of Mortgages: From the Beginning of Time.....
I will be adding more to the story as the market figures out how much money they want upfront to cover their risk level. Rates may stay level but points could go up considerably
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