Jan 2010 06

Thanks to our friend Brian Cav over at SmarterBorrowing.com for the following 5 Thoughts on Mortgages for 2010.

Have we ever come into a year with so many questions regarding mortgage financing?

* What will happen with mortgage interest rates?

* Will banks continue to have tighter lending guidelines?

* How much will you need as a down payment?

* How important is my credit score?

1. Credit Scores

Please, please, please have the best possible credit scores when you submit your mortgage application for purchase or refinancing. A mid FICO score of 740 or higher for a borrower and/or co-borrower will get you the best mortgage financing interest rates you can get today. Keep a close eye on your credit scores, check them to make sure there are no errors. You can get one free Credit Report per year from the three credit bureaus (Experian/Equifax/TransUnion) from www.annualcreditreport.com. Do it.

2. Down Payments

The more the merrier… I can’t stand this saying. The larger the down payment, the lower the interest rate on your mortgage. Pretty simple. We’ve returned to an old rule of thumb on down payments: 20% down will get you the best mortgage interest rate. After a few years of lowered required down payments, the minimums are back with a vengeance. An example: A condominium in Greater Boston a few years ago could be financed with no money down. Today financing for that same condo requires at least 10% down payment. One important exception: FHA loans, which are backed by the Federal Housing Administration http://www.hud.gov/offices/hsg/fhahistory.cfm, require only a 3.5% down payment.

3. Mortgage Interest Rates

Folks… They are going up, and they are going up soon! Homeowners: if you are considering refinancing but have not pulled the trigger, please think about it. Refinance with a lower Mortgage Interest rate and lower your term? Home buyers: if you are on the fence with a specific home to purchase I see Mortgage Interest Rates at 6% by mid to late 2010. Please contact your Real Estate Agent. Get my take on where mortgage interest rates are headed with my weekly Boston Massachusetts Mortgage Market Update Here’s a link to my recent post on whether to refinance now. Also, the Fed’s purchase program is expiring mid 2010 and I would not plan on this being extended again. No one wants mortgage-backed securities these days so I would expect mortgage interest rates to go up because of this. All things are pointing towards higher mortgage interest rates in 2010.

4. FHA

FHA mortgages are amazing and very popular right n0w! For mortgage borrowers who cannot meet the current tighter guidelines we have in our market, the FHA Mortgage may be the answer. The average credit score requirement for an FHA borrower is around 690, so if you don’t have a 720 or better credit score and a minimal down payment this is a mortgage program you can look at. Now for the bad news… FHA loans are more expensive than conventional Mortgage products (although not by much) because there is a insurance premium as well as a tiny bit higher Mortgage Interest Rate. I blogged recently about the Obama administration announcing tighter guidelines for FHA Mortgage Borrowers in 2010.

5. Lending Guidelines

Yes, I think guidelines will get tighter. Unemployment is around 10% and the labor market is awful. There is no way credit requirements will get better in 2010…

Questions? Comments?  Contact

Brian Cav



Brian Cav is a Mortgage Banker in the Greater Boston Area with over 10 year of experience in the Financial Industry.  Reprinted with the permission from www.SmarterBorrowing.com Please visit http://smarterborrowing.com/ for additional Blog Posts, etc.

Dec 2009 18

Courtesey of Brian Cav over at Smarter Borrowing


The answer is most likely yes!

Borrowers are taking advantage of rock bottom rates to refinance their home mortgages. Mortgage interest rates are at all-time near record lows! Homeowners are using the opportunity to adjust the terms, payment and interest rate on their loans. This “rate fiesta” might be coming to a halt soon, though – in 2010 the government will stop buying mortgage-backed securities. Without this enormous customer, rates will start to climb. Here’s what the Wall Street Journal had to say earlier this week about the recent surge in applications and the coming market changes:

Last week’s post-Thanksgiving shopping rush also saw a surge in mortgage applications, with loan application volume up 8.5% from Thanksgiving week on a seasonally adjusted basis.

But mortgage rates rose modestly last week, to an average 4.88% from 4.79%, according to the Mortgage Bankers Association, ending a six-week run of declining 30-year fixed rates.

The boost in applications was driven primarily by refinance interest, and the MBA’s Refinance Index gained 11% from the previous week, while the Purchase Index was up 4%. New home loan applications were driven almost wholly by demand for government-backed loans from the Federal Housing Administration and other federal agencies.

Mortgage rates have been at near-record low territory for the last couple of months, but the big question is what will happen next year, when the Federal Reserve is scheduled to end its purchase of mortgage-backed securities that has helped push rates down for much of 2009. (Nick Timiraos, WSJ real estate blog, 12/9/09)

Refinancing could save you a considerable amount of money over the life of the loan and potentially improve your overall financial outlook!

How would refinancing now help you?

  • Refinance to a lower interest rate which will lower your monthly payments.  What is your current Rate?
  • Convert your current Adjustable Rate Mortgage (3/1, 5/1, 7/1, or 10/1 ARM) to a fixed- rate loan, which will keep your payments safe from possible interest rate increases. The 30 year fixed is at a all-time low, lock it in and give yourself piece of mind
  • Shorten your loan’s term to save even more money. 25 year fixed? 20? Can you afford a 15 year fixed mortgage payment?
  • Combine a first and second lien to a single loan for simplicity and savings. Debt consolidation to one loan!

You may also be able to tap into your home’s equity with a cash-out refinance and use the cash to fund home improvements, college tuition, or other major expenses.

What To Do:

1.  Submit a Refinancing Application via Phone, Email, Web, etc.

2.  Mortgage Refinancing Application gets Processed and Approved

3.  Pass along your Approval Conditions and Disclosures, Appraisal gets completed and Approved

4.  Schedule a closing 45 (+/-) Days from Application Date

bc@SmarterBorrowing.com 617.771.5021