The Bizzy Orr Team is happy to introduce a special guest columnist, Gary Franks, Sr. Loan Officer/Branch Manager, Sunstreet Mortgage, LLC.. Thanks Gary!!
The new year is always a fun time to look ahead to new possibilities in almost all facets of life. Health, occupation, vacations...and of course economic projections. While I'm certainly not qualified to speak on big economic topics, I can update you on what's new in the mortgage world and what our industry expects for 2019. Here goes!
New Loan Limits
Every year Fannie Mae analyzes average home prices throughout the country and makes a determination on the highest loan amount they will purchase, thus defining a conventional loan. Anything above their limit becomes a Jumbo loan. In 2018, the "conforming limit" was at $453,100. To kick off this year, the new loan limit for Single Family Homes has been increased to $484,350. This is an increase of almost 7% and is a result in the values of homes across the country staying on the rise.
The Veteran's Administration followed suit and uses the same number, $484,350, to establish the maximum loan amount they will finance without requiring a down payment. Veterans can buy homes larger than this number, but any amount over this limit requires a small down payment.
Lastly, FHA also adjusts their loan limits annually, usually at 65% of Fannie Mae's limit. Here in Pima County, and most counties in Arizona, the 2019 loan limit is $314,827. Last year the limit was $294,515.
When limits increase, more people are eligible for the most affordable financing options available. Also, more sellers are able to market their properties to larger pools of potential buyers.
Loan Program Update
Don't be alarmed when you hear that some of the loan programs that took the brunt of the blame for the housing crisis in 2007 are edging their way back into the market. While it's true that some loans are being re-created to use reduced documentation to help qualify specific borrower traits, for example Stated Income Loans, the legislation that resulted from the Great Recession will put some significant restrictions on how far these loans can go. Also, as these programs are slowly reintroduced, they will come with steep down payment and credit score requirements.
There is one Down Payment Assistance program of note that should continue to be available through June 2019. It is marketed as "Pathway to Purchase" and provides 10% (but no more than $20,000) as down payment help, in the form of a "silent " 2nd lien on the property. The lien is fully forgivable if the borrower lives in the home for 5 years. I'm not a huge fan of most of these programs, but this one combines a substantial incentive with a very reasonable interest rate. While it's only available in certain zip codes, it's worth enquiring about if you or someone you know is looking to purchase in the next few months.
All of this said, 99% of the loans made these days continue to be standard Conventional, FHA, VA, and Jumbo fixed rate loans.
The 2019 Rate Outlook
Crystal balls, especially when I look into them, are about as reliable as a weather forecast. . .so have some salt handy as you read on. . .
Earlier in 2018, most rate watchers and prognosticators were predicting increasing interest rates through all of 2019, starting with a Federal Reserve Board rate hike in March of this year. This likely means rates will bounce around in a range close to our current levels for most of the year. Only some very positive economic data, combined with inflationary concerns, would get our rates moving upwards again.
For the first time in almost a year and a half, we saw a slight rate decrease in the last 30 days. Rates in November 2018 were typically between 5.00% and 5.5% (depending on loan type down payment, credit score, etc.). Today we see most rates coming in between 4.5% and 5%.
As I write this, it feels like the rate decrease has stalled. From here we're hoping for many months of stability at these levels. I believe the Federal Reserve feels the same. It's hard to root for rates going much lower, as that would likely be at the cost of our stock market, and consequently our retirement account values.
Best wishes in 2019!
If you have questions for Gary, click here
for his contact info and website.