At long last mortgage rates have turned the corner and are coming down for the first time since the 2016 Presidential Election. After 2 years of steady increases, mortgage rates are finished the year by dropping a half percent. On November 15th the national average for mortgage rates peaked at 5% for a 30 year fixed loan under $484,000 but is now at 4.5% and on a downward trend. The recent negative headlines surrounding the financial markets and the extreme volatility we have seen lately are definitely a concern but the overall economy remains quite healthy. Many economists are predicting the drop in mortgage rates should stem or even reverse the slide in home sales that occurred during the second half of 2018.
Right now is really the “perfect storm” for prospective homebuyers who have been waiting for prices to go down so they can afford to buy. The real estate gains we have seen the past few years have leveled off over the last few months due to increasing mortgage rates and inventory but the sudden drop in interest rates will bring a lot of these buyers back into the market very soon (and it has already started…). Our advice for anyone looking to buy in the next year is to get going ASAP to take advantage of lower house prices and negotiating leverage for the time being because lower interest rates will almost assuredly lead to continuing price gains in 2019. Loan programs are becoming more and more aggressive and the 2019 conforming loan limits that were just announced have been raised to $726,525 in Los Angeles County and other high cost counties while Ventura County’s conforming loan limit went up from $672,000 to $713,000 starting January 1. Jumbo rates are great as well and we expect this trend to continue well into 2019.
No Credit Score? No Problem!
It used to be that if you did not have a credit score, you were subjected to “manual underwriting” which usually meant you didn’t get a mortgage. Recently Freddie Mac expanded its automated underwriting engine for prospective homebuyers without credit scores. We can now receive automated underwriting findings for these loans which will help speed up fulfillment timelines and make life easier for those folks which have not established credit.
Here are some of the guidelines for assessing prospective borrowers without credit scores:
- Loan must be for a purchase or a rate/term refinance.
- Must be secured by a 1-unit property.
- All borrowers must occupy the property as their primary residence.
- LTV must not exceed 95%.
- Must be a fixed-rate mortgage.
- Loans for manufactured homes are not eligible.
As always, please contact us with any questions, we are here to help. We hope you and yours have a very happy and healthy 2019, the best is yet to come!