This past week, the Federal Reserve Bank reduced interest rates another 3/4 point and Fannie Mae and Freddie Mac had their capital surplus requirements reduced, giving them the ability to raise hundreds of billions for mortgages.
While this is welcome news to the beleaguered real estate market, other actions taken by Fannie and Freddie over the past months will continue to act as impediments to getting that home loan or refinancing an existing loan.
We have mentioned in previous articles of the "declining market" polices issued by Fannie, coupled with more stringent appraisal requirements will have the effect of reducing loan-to-value on homes in many markets throughout the country.
Further, Fannie and Freddie implementation of "risk based pricing," had the effect of increasing the amount of down payment required for a mortgage loan and/or increasing the interest rate on mortgages for home buyers with credit scores of approximately 700 or less.
If your client is ready to purchase or refinance, get them preapproved for a mortgage. At least then you will know what loan programs, down payments and interest rates they qualify for.
Predicting the future direction of interest rates is highly risky. By historical standards, mortgage interest rates should be lower than they are; but, they are not. They continue to fluctuate, often numerous times during the same day.
Loan programs offered by Lenders continue to decrease. Waiting for that further interest rate reduction might not be the most prudent thing to do.
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