2009 mortgage landscape | fha, va, usda, low rates, high inventory
2009 mortgage landscape
Most prospective mortgage shoppers should be aware by now that mortgages are tougher to get. “Stringent” is the word we keep hearing used to describe the tests for borrowers these days. That’s putting it mildly! The traditional touchstones of risk avoidance—solid credit scores, sizable down payments, documented income, sensible debt-to-income ratios and adequate reserves—are not just back in vogue, they are being judged with an even more critical eye.
Just when you would seem to have cleared the bar for the vanilla mortgage programs at Fannie Mae and Freddie Mac, which have definitive standards, some lenders are imposing even tougher ones. Finally, when you do clear all the hurdles, you will have to pay higher fees. In most cases, you should probably count yourself fortunate to have that opportunity; many won’t.
As for those exotic loan products, such as 100% financing programs and no- or low-documentation loans, they are now gone entirely, extremely limited or exceptionally costly. Stated income loans are now illegal in the state of Maryland. And the risky mortgage products that married low teaser rates with so-so credit scores have vanished, along with many of the lenders who offered them.
But piercing the gloom of the mortgage market, there are some bright rays of sunshine: dramatically falling mortgage rates. Mortgage rates began their recent plunge in late November after the Federal Reserve announced that it would be buying a ton of Fannie Mae, Freddie Mac mortgage paper. Rates started falling immediately, even though the Fed program won’t start until February 2009.
When rates dropped below 6% for 30-year conforming fixed-rate mortgages, that got the attention of refinancers, who stormed mortgage lenders to board the low-rate express. Potential homebuyers have started to pay attention, too. Rates have continued to drop since, to just above 5% in mid-December. And the Treasury Department is reported to be weighing a program to facilitate mortgages as low as 4 1/2% for purchases (but not refinances, it is said). The conforming limit is the basic maximum for Fannie Mae and Freddie Mac loans across the country.
Along with FHA, that is where the money is these days. For 2009, the conforming limit is $417,000, the same as it has been since 2006, but in high cost areas it is 115% of the median home price, to a maximum of $625,500. That’s a reduction from the temporary limits in effect in 2008, 125% of the median, up to $729,750. Need a mortgage higher than the conforming limit? You are now in jumbo no man’s land, territory where many lenders fear to tread.
Jumbo loans can’t be sold to Fannie or Freddie. Lenders used to be able to securitize them to sell to investors. That is now difficult, if not impossible, so the lender has to keep them in their portfolio and assume all the risk. As a result, lenders are asking markups of 1 to 1 1/2% above conforming rates and imposing standards so strict a stoic would beg for mercy.
MD jumbo limits – Virginia jumbo limits
Need a low-downpayment loan? A popular option ( 3 1/2% down required) is FHA. The 2009 base FHA loan limit is $271,050, but in higher cost areas it is 115% of the local area median home price, up to a maximum of $625,500 fha jumbo limits. As with conforming loans, this is a reduction from the 2008 max of $729,750.
Need 100% financing? A veteran with full eligibility can purchase a home costing up to $417,000 anywhere in the U.S without a downpayment through a VA loan. The VA does this by guaranteeing 25% of the loan amount. VA loans are now available without a downpayment for loan amounts up to 125% of the median price for a single family residence in a county. That means no-downpayment loans of up to $1,094,625 in the very highest cost areas.
You can also see if your property is eligible for 100% financing through the USDA program. Call us to run the address. You can also find USDA mortgage rates here.
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