‘Home Interest Rates Fall’, Loan Demand Soars 9%

Mortgage rates posted a sharp drop last week, which sparked a refinancing rush among home owners, the Mortgage Bankers Association reported Wednesday.

Mortgage application volume, including applications for refinancings and home purchases, surged 9.3 percent week over week on a seasonally adjusted basis.

The gains were almost all attributed to refinancing applications, which posted a 16 percent week-to-week increase. Applications for home purchases rised just 0.2 percent. Still, purchase applications are 25 percent higher than a year ago, the MBA reports.

Source: “Wealthy Borrowers Behind 9.3% Jump in New Mortgages,” CNBC (2/10/16)

Rural Areas Beckon More Buyers

Homebuying in rural communities is on the rise: Last year mortgages for home purchases increased at a faster rate in rural communities than in the rest of the country. What’s more, rural borrowers paid significantly higher rates of interest than urban or suburban home buyers, according to a newly released analysis of the Home Mortgage Disclosure Act by Keith Wiley, senior research associate at the Housing Assistance Council.

Rural home purchase originations climbed by nearly 7 percent in 2014 year-over-year. Meanwhile, the overall national increase in home purchases increased 4 percent.

Rural home buyers are paying higher interest rates than urban or suburban buyers. About 15 percent of all rural home purchase loans were classified as “high cost” last year – that’s up from 11 percent in 2013. The rate of rural high cost lending is about 4 and 3 percentage points higher than the rate for suburban and urban loans.

Source: “Rural Communities Attract More Buyers,” Real Estate Economy Watch (Oct. 9, 2015)

Stage Set to Revive First-Time Home Buyer Market

The move by Fannie Mae and Freddie Mac this week to offer 3 percent down payment loans may reignite the first-time home buyer market.

The new loans announced by Fannie Mae and Freddie Mac will be fixed-rate mortgages for up to 30 years, available only on a primary residence. Fannie plans to begin issuing the 3 percent loans before the end of the year. Mortgage insurance payments will be required, and qualified buyers will need to complete a financial counseling program.

Freddie Mac plans to start issuing its 3 percent loans to low- and moderate-income borrowers in March 2015. Eligible borrowers will be required to earn less than an area’s median income and will have to pay mortgage insurance and do financial counseling. Monthly payments also will have to fall under 43 percent of the borrower’s income.

Source: “More Americans to Buy Homes with 3 Percent Down,” The Associated Press (Dec. 11, 2014)

It’s Taking Less to Get an FHA Home Loan

First-time and low-income mortgage borrowers may have an easier time qualifying for a Federal Housing Administration loan. Ginnie Mae, a government agency that issues bonds backed by FHA loans, reports that the average credit score on FHA-backed loans fell to 680 in 2013, and the average debt-to-income ratio rose to 40.3 percent — both indicators that credit may be easing.

In comparison, Ginnie Mae reported in January 2013 that the average credit score was 701 and the debt-to-income ratio was 38 percent.

“The FHA theoretically allows credit scores as low as 580,” the L.A. Times reports. “But lenders, buffeted by defaulted loans and demands that they buy back troubled mortgages that they sold, generally have set standards higher since the mortgage meltdown.”

Source: “Average Credit Score Falls on FHA Loans,” Los Angeles Times (Feb. 27, 2014)