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Mortgage Rates (4 Viewers)
- Thread starter MechEng
- Start date
fruity pebbles
Footballguy
Read JPM is tightening lending standards on conventional loans. Need a 700 credit score and 20% down. Do you think that’s going to be the norm for awhile?
Dan Lambskin
Footballguy
Closing tomorrow
Todem
Footballguy
I think that is very hard to say.
All depends on how soon or long it take to get the economy going again and how many people suffer long term unemployment that are homeowners currently and will stop paying their mortgage.
I had to change course on my mortgage last week. I had a jumbo mortgage commitment but it is on new construction which closes in June. The arm product I wanted went away like a fart in the wind and all they would offer me was a 30YR fixed that was way above conventional rates. The spread went through the roof because of what is going on in the MBS market.
I have a fantastic mortgage broker (have known him for over 25 years and he did my mortgages on my very first home in 99, my current home in 09 and now my dream forever home in 20). We ended up going conventional for the first (going to lock in in two weeks once we are 30 days out from closing) and the lock will be anywhere from 2.875 - 3.5% He will show me the sheet and let me decide what I want to do. Then we secured a 2nd HELOC at Prime plus .25 interest only for the remainder (The loan amount was 700K with the Jumbo). Have a plan to pay off the HELOC within 10 years. By year 10 I will owe around 395K...then I will pay off the first over the next 10 years by redirecting what I paid the 2nd to extra principal. So by age 70.......mortgage free. In my line of work.....retirement is when they carry me out LOL. I have no reason to retire (money manager). I love what I do.
If I had to predict how long these tighter lending standards stick (and remember the big banks are not the only game in town) it will be 12 months maybe 18. It is crazy what is going on. But really...who knows?
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fruity pebbles
Footballguy
If mortgage lenders do tighten down to that extent it’s really going to destroy the housing market. Last couple years, 40% of mortgage loans have had 20% or more down. Add in the high unemployment rate and job loss and seems like a recipe for a housing market crisis.
Todem
Footballguy
Guinis72
Footballguy
I'm currently looking at refinancing from a 30-yr to a 15-yr conventional. We bought our house 3 yrs ago and are currently paying 4.25% with lender paid PMI (would have been 4.0% otherwise). Our house is worth about $470k and we currently owe $368k. The house was built in 1976, so has a lot of things we need to update, but we had to get an equity loan last July to replace the roof, a big bow window in front of the house, and another project or two TBD. We still owe about $24k on that though, so so it was putting us around 83% loan to equity (compared to 78% without). That was driving up the rate quotes I was getting to about 3.5% (and would also have PMI). Since we have a low level of non-mortgage debt, and both have good credit scores, I decided to try to get a personal loan to pay off the equity loan. I ended up getting approved by Lightstream on Friday @ 8.49% and they funded us Monday! My equity loan rate was 6.09% (PenFed), so I'm paying a little more interest but should save a lot more in the long run if I can get this refinance done. I'm just waiting for that payoff to clear, and then get back to shopping rates! I'm 48 so I feel like going from 27 yrs left on a mortgage to 15 yrs left would be a game changer for me!
Chadstroma
Footballguy
Chase has not really wanted to be in the mortgage game to begin with. Jamie doesn't like them and they basically have always done them for those who don't know any better and go get a mortgage through Chase because.... well.... Chase is their bank. They will do them with stricter underwriting, higher rates and fees if you really want to do a mortgage with them but they have not been out trying to get mortgage business at all for years.
Fairway, a large retail lender that also does wholesale, announced that they will no longer do any refinances under 700 scores.
Will 700 with 20% down be the norm? No, not likely that extreme but credit score minimums are increasing, housing and DTI ratios decreasing, and reserve requirements increasing along with lower loan to values allowed. I still have lenders doing 580 right now. I don't trust doing a loan for someone with say a 600 score right now. I have had multiple conversations over the last couple of weeks that explain that if they must try now and want to roll the dice then we can go but they can spend money on the process and get to the closing table and be told no. Pretty much all agree to let me help them get their credit up and save up money over the next few months and be in a better position down the road. I know of a large regional bank that hasn't changed any of their underwriting yet (and the loan officer loves to say that though I have privately warned him that he needs to be careful because it will change).
Underwriting will tighten and continue to tighten as long as we are in 'crisis mode'. I think we will see things stabilize and then loosen as we go into recovery mode. I don't think the industry norm will quite get to 700 and 80% LTV but I am telling people that the min score that I feel confident I will have options for doing a purchase right now is 680. Under that, I start to get a little nervous and the lower from that the more nervous I get.
Chadstroma
Footballguy
I don't think that will happen in as much as a housing crisis. A significant amount of these people filing unemployment will have jobs once we are going about regular business again.
There will be a slump in valuations I think as there will be a buyers market and there will be deals for great buyers value to be had with people needing to sell because of economic hardship. But indications seem to be that this will be a V shaped recovery and interest rates are likely to be extremely low. This will help buoy valuations. The refi boom that will likely come will help that recovery. People tend to spend the extra $200 or so that they are saving a month from a refi on other things which means the economy grows.
Anecdotally, I have a lot of people lined up to buy once things stabilized and they have worked on their credit a bit.
Short term, if you are well qualified or have cash, there may be some great opportunities that will pay off well.
Chadstroma
Footballguy
If your main goal is to save money then doing a 15 yr is your best bet. Lower rate and shorter amortization schedule equals big savings. However, doing a longer term increases your cash flow. Pay off the personal loan that you did fast and then invest the money for a higher return than the 3 whatever % you are paying on the mortgage. Something to consider (not to mention you can always pay more principle if you must... I am on a 3.25% mortgage from 2012 and I have never paid an extra penny into principle because 3.25% is cheap money and the money can be better used elsewhere).
If you want another quote from a broker, let me know and I can get you in touch with someone in your state.
Phil Elliott
Footballguy
I think ever since the financial crisis, we have had to provide last two year’s federal tax returns and all the various savings/retirement statements. Never had to do that before. Our credit has been excellent also.
CR69
Footballguy
Wow. On conventional refinances I am just getting a month of pay stubs and a w-2. Not even that is their employer uses electronic verification. On purchases the only addition is documenting enough funds to close.
Chad - is your thinking we still see mortgage rates drop from where they are? Do you believe that’s in the next couple months or more likely closer to the EOY? Do you happen to have any good articles that would go into any more detail on that thought process?Chadstroma said:
matuski
Footballguy
Tax returns, 2 months pay stubs, all bank accounts (checking/saving/investing/401k), 7 years employment history, drivers license, blood type, eye color, sexual preference, favorite ice cream flavor.CR69 said:
And usually have to submit it all twice/thrice after the broker forgets they have it.
We are in interesting times for the housing market. I didn’t see the last few years what could ever derail the boom due to such low supply, low interest rates, and massive growth in investing/speculation for rentals/flipping. But these moves to suspend foreclosures and evictions, allow easy forbearance, and social distancing/bans on open houses and house tours I think we could finally see a downturn. There are already calls in some communities to just outright cancel/forgive rent due and mortgage payments. These measures and economic fallout should at least cool off the crazy investor side of the housing market.
Phil Elliott
Footballguy
These three closings were all conventional. Two home purchases and the refi we hope to close by end of month. All in Austin.CR69 said:
CR69
Footballguy
I'm guessing it was a bank or credit union then? If so they tend to be more conservative and over condition files. We go through that every time we get a new underwriter and we have to train them that we strictly follow AUS findings and they need to remove half of stuff they're asking for lol.
Chadstroma
Footballguy
I think there is a decent chance we see all time lows once the crisis period is over and we are in recovery. If not, they should remain very low in this range through the recovery period.
This biggest question to answer is when is the crisis period over. Once you answer that then you can really start to answer other questions and I don't think anyone has a good answer to that yet.
I do not have any articles. Most of the information I take in to help keep my informed and shape my thinking are Zoom/FB Live videos from those in the industry that know stuff.
Chadstroma
Footballguy
Not my area these days but I would think a few banks would hold off on funding new lines or loans but not industry wide.
My one lender I have to do Equity Loans with sent me an email today showing max combined loan to value at 90% (they use to do 100%).
My wife's bank that she works at (about 60 branches in IL, WI and FL) are still doing them with at least 680 credit.
So, there are options for sure.
Edit: if you really need to do one, I can get you in touch with my wife. They do lend in most states. My equity products are the suck except when you needed to go to 100% CLTV or had below 660 credit which most banks would do.
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The Z Machine
Footballguy
@Chadstroma, if I think that my salary will drop to 80% with commensurate work hour reduction, how would that affect refi eligibility? Should I try to get all my paperwork in now with pay stubs that show a constant salary for the last year? Salary reduction would likely happen in mid-May paycheck.
I don't want to get the double whammy of salary reduction and losing a refi opportunity.
I don't want to get the double whammy of salary reduction and losing a refi opportunity.
IDK about all, but definitely hard to find new ones right now. I was told by one loan officer that the largest HELOC lender in the country put everything on hold over 2 weeks ago.
Strangely enough, still getting plenty of mailers every day of companies that want to give me a personal loan though.
wilked
Footballguy
Chadstroma
Footballguy
Most lenders are asking for confirmation with verification of employment that there is no pay decrease, loss of hours or otherwise loss of income at the end of the process on day of or right before closing.
The income used would be based on the reduced earnings.
Chadstroma
Footballguy
Depending on how long the crisis goes it may end up tightening up more. If you thinking line of credit, I would prob jump on that now. If the crisis is done, then I think most lenders will be lending again pretty much right away though still with tighter underwriting. They killed the incentive plan for her bank so it doesn't "help" her in any way. Also, remember local credit unions are usually the best route to go with equity products. (Though they may be more conservative now than larger institutions)
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The Z Machine
Footballguy
And if I do have reduced income, will the bank kill the refi? Even if that reduction is 10% of the overall income for me and my wife and all other factors are favorable? We have good credit, good debt to income ratios, and LTV is like 25% right now.
Chadstroma
Footballguy
They should just qualify you at that reduced income so as long as your housing and DTI ratios are still in line (which is the only thing that the reduced income would really impact) and assuming everything else is in line with their standards then you shouldn't have a problem.The Z Machine said:
Dan Lambskin
Footballguy
Just want to say thanks again to @Chadstroma for connecting me with someone who could provide a solution
closed last week, previous loans were paid off today
payoff time is the same (has just about 15 years left on my original) but about $100 a month less
closed last week, previous loans were paid off today
payoff time is the same (has just about 15 years left on my original) but about $100 a month less
Don't Noonan
Footballguy
Sitting at 3.67% on my 30 year and 4.50% on my investment property and can't get rates low enough to refi. Frustrating.
Chadstroma
Footballguy
Don't Noonan
Footballguy
Is it worth it to contact my current lender Wells Fargo to see if they might modify it?
ThaPenguin
Footballguy
Thank you to Chad and the thread in general for the abundance of info. Closing next week on a refi. Knocking a year off, payment lowered about $10/month, AND taking out approx $11k for home improvements, along with skipping the June payment.
Northern Voice
Footballguy
Good timing for us, renewal coming up next week anyway and we're getting a 5-year fixed rate of 2.81% up here (Canada). 4 year fixed is 2.77.
matuski
Footballguy
Cutting 7 years off my loan and $150k+ total interest... payment going down $300. Close Thursday.
Thank you @Chadstroma... didn't work out with your guy, but you have been a huge help.
Thank you @Chadstroma... didn't work out with your guy, but you have been a huge help.
Northern Voice
Footballguy
And... I just got a call saying they've dropped to 2.6%, we sign it on Monday.Northern Voice said:
The Z Machine
Footballguy
Glad I am lazy... Just got furloughed for 90 days. And refi would have fallen through.
Chadstroma
Footballguy
I guess it doesn't hurt to ask. I don't see why they would though to be honest. One thing you can try with Wells Fargo.... order a payoff through their automated system. I have had brokers report that Wells sent a modification paperwork to keep the loan soon after that. It doesn't work always though, my loan is with Wells and I have tried it... a couple of time... lolDon't Noonan said:
Chadstroma
Footballguy
Chadstroma
Footballguy
Northern Voice
Footballguy
I don't know what that means but 2.6% is 5 year fixed. Is ARM variable rate in the States?
Chadstroma
Footballguy
Yea, Canadian loans, from what I have heard, are a whole different ball of wax....
So, in the US, an ARM is Adjustable Rate Mortgage. Typically The ARM's are 1/1, 3/1, 5/1, 7/1 and 10/1. The first number is how long the rate if fixed for, the second is when it adjusts. A 5/1 ARM is fixed for 5 years and then adjusts annually afterwards.
Dan Lambskin
Footballguy
Yeah once BOA got the payoff request I got the automated “hey let’s work something out message” from them, didn’t even read it
Chadstroma
Footballguy
From Wells these were not solicitation to refi with them but an offer sent via FedEx a few dsys layer to modify the loan to a lower rate with very little cost and no loan process. I haven't heard anyone say they have seen it for a while but it takes less than 10 min to order a payoff on their phone system.
Instinctive
Footballguy
Well, here we are, closed on a house and with a locked rate as we go through the process. All came together WAY faster than we thought it would (mostly because COVID-19), as we had planned to shop all spring to learn what we liked, actually do showings much of the summer, and then buy in the winter.
Well, in the area we are buying, some of the homes we really liked dropped significantly (10s of thousands of dollars,
) and it felt like the time to pounce. So here we are, with a maximum conventional 30-yr mortgage at 2.875%. Hoping it all goes smoothly with a closing at the end of May! Going to be an interesting month-ish.
Chad - big thank you for setting us up with your guy. He was super knowledgeable, and we were moving through the process with him when our builder gave us their list of preferred lenders. I was very wary (based on your awesome manifesto!) and immediately kept your reference in the loop, looked out for the full bottom line costs, and turns out that the ~$4k incentive combined with a couple of the lenders being ones our realtor had used for other homes and knew to be independent of the builder itself led us to a pretty great deal. He looked at the papers and said he couldn't beat it and we should go for it, so we did.
Well, in the area we are buying, some of the homes we really liked dropped significantly (10s of thousands of dollars,
) and it felt like the time to pounce. So here we are, with a maximum conventional 30-yr mortgage at 2.875%. Hoping it all goes smoothly with a closing at the end of May! Going to be an interesting month-ish.Chad - big thank you for setting us up with your guy. He was super knowledgeable, and we were moving through the process with him when our builder gave us their list of preferred lenders. I was very wary (based on your awesome manifesto!) and immediately kept your reference in the loop, looked out for the full bottom line costs, and turns out that the ~$4k incentive combined with a couple of the lenders being ones our realtor had used for other homes and knew to be independent of the builder itself led us to a pretty great deal. He looked at the papers and said he couldn't beat it and we should go for it, so we did.
Drunken Cowboy
Footballguy
I talked to Chad's guy. He was really good. I am probably holding out for lower rates.
⚡DEADHEAD⚡
Footballguy
Quoted HELOC for up to $250,000 with Wells at 3.375.
2.7 on anything purchase and paid off in the first year.
Thoughts?
2.7 on anything purchase and paid off in the first year.
Thoughts?
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