William Piotrowski What Types of Mortgages are Currently Popular
The Zoom call this week was presented by William Piotrowski a Branch Manager and loan officer for Diamond Residential Mortgage. As such, with the coverage his company enjoys, he offered up information on the state of loans in the current market.
FHA loans are a popular product, at least through the first quarter of the new year enjoying a jump from 8.4% to 11.7%. This represented the largest increase in loans since 2007. While it is still lower than people would like to see it still represents a significant appreciation. Sellers seem to be loosening their reluctance to allow for an FHA appraisal and his caution was for agents to be cognizant of what would flag an issue and work to get a solution to allow the mortgage to flow.
Peeling paint is a major negative, as well as a questionable roof, and carbon and smoke detectors. Inspectors have also been known to take issues with neglected windows. Cracked panes, missing caulk take the habitability away from a home.
Conventional loans still lead the types of mortgages being sought at 76.1%, followed by FHA and then there's cash accounting for 8.3% of all purchases in the first quarter.
Different regions of the country see this as a different trend.
Credit scores will always impact loans, and even though Federally funded loans are designed to help lower income people, there are safeties, called overlays in place. as a safeguard. A loan on a credit score of 500 is possible, but the borrower still needs to have good spending habits.
Advantages with an FHA Mortgage.
Aside from the allowances for lower credit scores, an FHA loan has other advantages.
A borrower can apply for an FHA loan 2 years after bankruptcy while conventional requires 4 years.
After foreclosure, it is a 3 year wait for an FHA loan against 7 years for conventional.
It is upon a buyer to offer full disclosure as to their credit history to their loan officer in order to better ascertain the type of loan they might be able to get.
A borrower can qualify for an FHA loan with as little as 3.5% for down payment. Conventional requires much larger.
FHA loans offer flexibility with gift funds. An employer can offer a gift letter as well as primary family members. It is understood that a gift letter does not have an expectation of repayment.
FHA mortgage insurance is a declining value over the life of the loan until a value of 78% equity has been achieved.
Debt ratios offer greater impact. FHA loans offer slightly better flexibility with debt ratios than conventional which is usually at 41% and FHA offers slightly better flexibility.
FHA allows for an assumable mortgage if the buyers have the means to repay the equity owed the seller. As an example, it was offered that one of the callers bought their current home some time back and it was an assumable mortgage. The seller had not owned the home long, and against a purchase price of $57,000 and an outstanding mortgage of $50,000 so the person needed to pay back $7,000, as well as demonstrating the ability to repay the loan.
There was some discussion on the frustration of buyers with the lack of inventory. Cash buyers' rule, however, and with the limitation of homes, highest and best will always succeed and this is not a trend that will soften any time soon.
Buyers are being forced to look at different locations; a different style of house, seeking less features with the hope that it can be upgraded in the future.
The lack of inventory is having an impact not only on buyers but also on the people trying to service the industry. William offered a statistic that over 600,000 people will leave the real estate business this year. In addition to agents, it would be inspectors, loan officers, photographers, title people, stagers, etc.
It was a full call with many questions being answered or discussed. It was apparent that the industry is entirely local and what may be happening in one part of the country is different in another.
William Piotrowski What Types of Mortgages are Currently Popular
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