The Federal Housing Administration has a new rule – if credit bureaus show unpaid collection accounts in your name that total more that $1,000, your loan application will not be approved.

Previously, the FHA was fairly lenient about such things, preferring to base your loan approval on your overall credit history and performance. Now, however, an unpaid account of more than $1,000 (or several smaller accounts that add up to $1,000) will shoot your application down.

What kind of unpaid accounts are we talking about here? Medical bills, overdue student loans, or any and all sorts of retail credit accounts that are delinquent are good examples.

What if a mistake was made and you don’t really owe the money that the credit bureau says you owe? Too bad – the FHA still won’t approve your loan. So the best advice about that is to check your credit bureau report and take steps to clean it up if it contains erroneous negative reports.

Critics blamed the FHA for too-lenient lending when the home finance market melted down. Obviously, the FHA is trying to address those criticisms.

The new policy went into effect April 1.

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If you are planning on buying a home anytime soon, we should talk about your home buying plans AS WELL AS your plans for financing your purchase. As a former mortgage loan officer, I can help you with both of those things. Get in touch — 727-643-7100 or beth@bethfrederick.com.

But to be fair, there is another side of the coin (isn’t there always?) which makes home-buying more of a challenge than it was in the rock-n-roll days.

I’m talking about down payments.

Home prices may be down, and interest rates may be at historic (or near-historic) levels, but the demand for more substantial down payments is up. It’s all part of the tougher underwriting standards; lenders want to see buyers begin the home buying process with a bigger personal stake in the transaction, and that means larger down payments.

Just a few years ago, it seemed like down payments were going to become a thing of the past. Nothing-down and little-down mortgages were all the rage, and you could buy expensive homes and finance them with big mortgages without having to come up with actual cash – or not much of it, anyway.

Great interest rates are available now, as I’ve written about in the past. But if you really want that rock-bottom rate, you’d better be ready to come up with a 20 percent down payment.  It’s still possible to get a mortgage and put less than 20 percent down, but the rates are going to be higher.

LendingTree came out with a report last week that listed state-by-state average down payments, and the average of all of them was 12.29 percent.

(I know you’re wondering what the average rate is for Pinellas County real estate. Actually, LendingTree didn’t get that fine on rates, but the company DID say what the average down payment is for the state of Florida: 13.16 percent.)

Fannie Mae and Freddie Mac want at least 10 per cent down.  If you want the very best rate, you’re going to have to also pay for private mortgage insurance – not part of the down payment, but an upfront cost you can’t avoid.

A Lending Tree spokesperson said, “The reality is when you put less than 20 percent down, you have to pay for some kind of insurance to protect the lender from the higher risk that you’ll default…but private mortgage insurers these days aren’t always willing to do business with low down payments.”

There is some speculation out there that if we are going to continue to have record low interest rates, the mortgage industry may increasingly move toward that 20 per cent down payments.

If you want a one-word answer to that question, here it is: No.

Still, it’s good news for the overall economy, and the strength of the economy (or lack of it) is what will ultimately drive home prices up and stimulate the market. It’s all about confidence, and no one has an awful lot of that right now when it comes to the economy, or visions of the future.

Nationally, the unemployment rate peaked in October of 2009, at 10.1 percent (according to the federal Bureau of Labor Statistics). It’s been settling back downward at a snail’s pace ever since, keeping pace with an agonizingly slow economic recovery.

If the economy was really starting to boom, a .4 percent single-month drop in the unemployment rate might be cause for celebration – and for a mini-stampede of home buyers wanting to take advantage of low home prices and historically low interest rates.

Instead, we have an economic recovery that is just creeping along. It doesn’t inspire much confidence about the future, and confidence about the future is what drives home sales.

If so, and you have a mortgage on your home, you may be starting to think about refinancing. After all, interest rates are at historic lows. Just about 10 days ago, Freddie Mac reported the average rate for 30-year fixed mortgages had dropped to 3.94 percent, which was the lowest rate in history.

So why wouldn’t you take advantage of that unbelievably low rate and refinance the old ranch?

Well, because a lot of experts are saying that mortgage rates might go even lower, that’s why. That’s where the steely eyes and the firm hands come into play.

You could re-finance now and take advantage of great mortgage interest rates. OR, you could wait a little longer and (perhaps) take advantage of even lower interest rates.

Rates may vary a little bit in different areas around the country. But rates are WAY down almost everywhere you look, and the end of falling rates may not be in sight yet.

Why do these rates keep coming down? There are several reasons:

The Federal Reserve has been buying up mortgage-backed securities in hopes of forcing interest rates down.

President Obama is trying to strengthen the Home Affordable Refinance Program, which helps home owners refinance their properties – even properties with little or no equity.

The idea behind all this is that if lots of people refinance their mortgages, it could have a stimulating effect on the economy at large.

With current rates hovering around (or even below) four percent, it’s tempting to think about refinancing now. After all, how much lower can the rates go?

Many industry observers believe that you should be able to cut at least one percent off your rate when you re-finance. If you can’t do that, they say, closing costs and fees could counteract the benefits of the refinance.

But if you can talk the lender into waiving many of the fees associated with a refinance, then it may make sense to refinance, even if the new rate is only a half-percent better than the old one.

So… do ya feel lucky? Well, do ya?

The Obama Administration’s first-time home buyer tax credit (remember that?) contributed to the opportunity, and quite a few people who had never owned a home before were able to buy. In the second quarter of 2010, 46 percent of homebuyers were first-timers.

So what’s happened?

First time home buyers are being squeezed again, this time primarily because home financing terms and regulations have gotten much tighter. Last quarter, the percentage of first-time homebuyers was down to 35 percent, according to the National Association of Realtors (NAR).

As the number of first-time homebuyers has slowed, so has the absorption rate of foreclosed and short-sale properties. If the real estate market and the economy in general are to recover, that property absorption rate needs to be getting better, not worse.

With home prices extremely low and mortgage interest rates at the lowest levels in more than 20 years, you’d think that home sales would be igniting. But they aren’t, and tight financing regulations are one of the major reasons why.

Now, stiff financing requirements are understandable and even desirable to a point when one considers the consequences of the very relaxed lending standards of the mid-2000s.

Still, going to the other extreme pours a lot of cold water on a much-needed recovery. Extreme lending policies at either end of the scale are bad for business and bad for the country.

Banks need to re-discover why they are in the business they are in – to provide financing for homes to people who are good, qualified borrowers. If we don’t have that, the real estate market will be dominated by cash buyers – read that investors. The National Association of Realtors says that cash buyers made up 30 percent of all home buyers in the second quarters of this year.

The real estate market should be dominated by people who want to invest in their own futures and in the well-being of their families, not by investors who are simply looking for profit.

Banks need to take a new look at their own mortgage underwriting standards, and make sure they can reasonably be met by qualified home buyers.

Here is what National Association of Realtors President Ron Phipps has to say about the issue:

“It’s frustrating for many creditworthy potential home buyers to realize that when they’re ready to make a move, banks remain risk averse. People with good jobs, long-term plans and who are willing to stay well within their means deserve an opportunity to realize their American dream of home ownership. When banks return to normal and safe but sensible lending standards, housing will be able to contribute its traditional share to economic growth.”

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Ready to talk about your own home ownership plans? Give me a call anytime: 727-643-7100. Or e-mail me at beth@bethfrederick.com

According to Freddie Mac, rates for 15-year fixed-rate home loans dropped last week from 3.66 percent to 3.54 percent, the lowest those rates have been since 1991.

Rates for other mortgage profits dropped as well. The average rate for a 30-year fixed mortgage dropped to 4.39 percent, the lowest rate for a 30-year mortgage this year.

Why are real estate mortgage interest rates so low in Pinellas County and elsewhere when there is so much economic uncertainty? Those uncertainties are part of the reason. Mortgage rates follow yields on 10-year U.S. Treasury notes. Weaknesses in the economy have led investors to take money out of the stock market and put it into Treasury bonds. That lowers the yield on the Treasury bonds, and that leads to lower mortgage interest rates.

Congress established Freddie Mac in 1970 to provide liquidity, stability and affordability to the nation’s residential mortgage markets. It provides mortgage capital to lenders.

Do those unbelieveably low interest rates make Pinellas County real estate ownership look more attractive to you? Why don’t you give me a call, and we’ll take a look what those rates can mean to you in terms of low monthly mortgage payments.

Call me anytime – 727-643-7100, or beth@bethfrederick.com

You spend weeks or even months searching for just the right home. After a lengthy search, and after kissing a lot of frogs, you find your prince of a home and make an offer. You and the seller finally agree on a price and terms; at last you have a contract!

But instead of everything moving forward smoothly, something happens, and you end up with a cancelled contract.

After all your careful work, how can that be?

Cancelled real estate contracts are one of the side affects of this very difficult real estate market, and they can happen for a multiude of reasons. The National Association of Realtors (NAR) reported this month that real estate sales slipped during the month of June for the third straight month, and one of the reasons was an increase in the number of cancelled sales contracts.

What’s the reason?

No one really knows for sure, but the NAR points out that tighter credit standards might be one reason. If a loan application is unexepectedly rejected because of credit issues, you can say goodbye to your sales agreement. Likewise, tighter appraisals might be a contributing factor; if a home doesn’t appraise for the agree-upon selling price, that can mean another sales contract that ends up going nowhere.

However, economic uncertainty and the federal budget debacle may be causing hesitation among some consumers or lenders.”

Other possible reasons, according to the NAR: general uncertainty about the nation’s economy, and about the federal budget. That uncertainty may affect home buyers and sellerds as well as mortgage lenders.

Lower limits on loan amounts are scheduled to go into affect on October 1. That is several months off, but some lenders may be applying those lower limits already, anticipating that same current sales may not close before the end of September. That could be having an impact, too.

If you are planning on buying a home in the near future, you may want to call me soon so we can discuss ways of making sure your sales contract stays together until the closing.

I’m always available for a chat at 727-643-7100, or via e-mail at beth@bethfrederick.com

But not everyone shied away from ARMs. Even though the total number of adjustable rate mortgages was way down in the first quarter of 2011, the total market share of ARMs actually rose to its highest point since 2008. Inside Mortgage Finance, a mortgage trade publication, reports that ARMs actually accounted for 12 percent of all home mortgages in that first quarter of 2011.

Why is that?

Mortgage rates are really low, and the rates for ARMs are REALLY low, and some buyers simply have a hard time resisting that fact. ARMs are especially attractive when mortgage money is expensive, but people really like those rock-bottom rates no matter what the prevailing rates are.

Adjustable rate mortgages are usually written for one, five or seven years, and their rates can go either up or down at the end of the mortgage term. It’s hard to imagine that the rates on new ARMs will be going anywhere but up, current rates being as low as they are.

But for some home buyers, that fact is not all that important. Some people buy homes knowing that they will be turning around and selling their new properties in just a few years – well within in the term of the ARM. In a case like that, there really isn’t much of a down side, or risk of an escalating mortgage rate.

Also, some people don’t like debt and have serious plans to pay off their mortgages in just a few years. If you are one of those people, once again the risk of getting caught with an escalating ARM isn’t very high.

The danger lies in getting an adjustable rate mortgage simply because of the more attractive rate, with no thought given to how you will cover your mortgage payment if the rate goes up in a few years. If you plan to stay in your home for a long time, an ARM may not be a very good strategy for you.

What’s the best mortgage strategy for you? Why don’t you give me a call and we’ll discuss your own special needs and strategies – 727-643-7100.