R.I.P. 97% Loan to Value: I can’t believe what I just read, I mean all of these new loan programs coming out and the market heading in the right direction and now this? I now know of companies offering Stated Income loans and companies that will offer loans the next day after your bankruptcy or foreclosure but the last person on the planet I thought would pull back would be Fannie Mae. Over the past couple years, I have seen the MI companies (mortgage insurance companies) get more aggressive with their guidelines allowing more and more homeowners to qualify for mortgage loans. I mean, the market has seen a somewhat stabilizing trend so it’s expected that more players are going to get in the game and offer some new loan products but Fannie Mae must have had enough?
The 97% Loan To Value maximum that Fannie Mae allowed on their conventional loans allowed me to compete with FHA, whose Mortgage Insurance Factors are through the roof by the way, but this 97% program is going to be gone soon. My suggestion is that if you are going to do this program you better do it really quick. Fannie Mae is implementing the changes to their automated systems effective the weekend of November 16th 2013 however the max loan to value of 97% will be disappearing on January 10th of 2014. I guess this gives us a little time to prepare?
Well, here’s the deal… It’s not the end of the world, it really is not. Personally as a Phoenix Loan Officer I rarely EVER offer this program… Why you may ask? Well, because I can NEVER over promise and under deliver… The fact is that unless you have stellar 740 credit, low debt to income ratios and some reserves (money after your cash to close is taken into account) you most likely will not even qualify for the 97% loan to value anyways. Usually when structuring a low down conventional mortgage I suggest to my clients that they need to have 5% down and if for some reason the stars align properly I might be able to pop them into a 97% loan to value program if they so desire it.
I guess what threw me for a loop was the fact that all of these new loan programs are evolving, and my theory is that new investors see opportunity in the stabilizing housing market and they are ready to play ball, but the biggest investor of all says no way, we are pulling back. Do they know something we don’t? Mini housing bubble again? Not too sure but it could be an accurate theory.
Really at this point, I am not really going to lose any sleep and neither should you… If you look at the average mortgage insurance premium on the 97% loan to value program totals to be about 1.15% annually based on the loan amount, for a $300k loan that is a payment monthly of $287.50/mo. In comparison to the .67% average for a 95% loan at $167.50/mo it usually makes a lot more financial sense to take the 95% route anyway.
I’m done rambling for the day, that’s all I got… Don’t lose sleep and if you want to work with local mortgage professional you know where to find me!
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