Due to the Federal Reserve’s aggressive action in purchasing Fannie Mae and Freddie Mac securities, financing is available for well qualified buyers. Interest rates have fallen significantly for conforming loans. There are new guidelines for Fannie Mae and Freddie Mac loans, and 3.5% down payment loans are available with tight restrictions.
BUYERS with good credit, an adequate down payment and 2 years or more employment history will qualify for Full Documentation loans. There are no “Stated” Loans ( no documentation) offered now. If the property will be your home, not a speculative investment, you should be buying for the long term. Today’s market gives buyers and sellers the opportunity to negotiate a reasonable deal for both parties.
If you are planning to stay in your home, it may make sense for you to refinance. Interest rates on jumbo 30 year fixed rate mortgages (loans in excess of $729,750 per the new Stimulus Bill) have decreased substantially over the last quarter to an average rate (as of 1/23/09/) of approx. 6.8% from 8.5%, but still are significantly higher than 30 year fixed rate conforming loans (loans of less than $417,000) which are at approx. 5.0% (which rate decreased about 1% over the last quarter). For a brief period a few weeks ago, interest rates on conforming loans approached the mid 4% range, but over the last several weeks have been creeping up. The large spread between fixed rate jumbo loans and conforming loans is amazing considering that prior to the mortgage loan melt down, spreads between conforming and jumbo loans were only approx. two tenths of one percent.
Jumbo Loans – Because of this high interest rate for 30 year fixed rate jumbo loans, most jumbo loans are being done for fixed rates of only 5 to 7 years, in the mid 5% range (with 1 point), with a 25% to 30% down payment, and excellent FICO scores of above 720. Conforming loans generally require a 10% down payment (less for FHA loans).
The Federal Reserve Bank has recently significantly cut short-term rates, however long-term rates have remained stubbornly high due to inflationary expectations.