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April 18 will Bring a Host of Changes to Mortgage Lending


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Rose Hart's
OUTSIDE
Upcoming Changes to Mortgage Lending

NEW COSTS, NEW RESTRICTIONS

For the past few months the rate for mortgages has been around 5 percent, but changes in loan costs and origination may add significantly to a borrower's costs.

On March 1, 2011- Freddie Mac will begin adding new fees for all applicants, even those who previously had avoided fees with credit scores above 720, and down payments over 20% of the purchase price. For these seemingly sterling borrowers, a fee of 0.25% to 0.50% of the mortgage value will be added to cover risk and service costs. A lower credit score, from 700- 719, and a down payment of less than 20% of the purchase price, will now pay a full percentage point of the loan value.

Effective April 18, the new Consumer Financial Protection Bureau is officially set to begin operations. On their agenda is new lending reporting requirements, and closing cost disclosures. Also on this date the Federal Reserve will begin enforcing a rule change on how mortgage brokers are paid.

On April 18 there's further bad news for moderate income, first time buyers, who generally rely on the Federal Housing Authority for loans. The FHA is raising its annual mortgage insurance premium. Its loans will now include an upfront premium payment of 1% of the loan amount, and an annual premium payment of 1.1 to 1.15%.

For conventional loans, the private mortgage insurance that is required when a buyer makes a down- payment of less than 20% of a home's value, will only be available to buyers with a credit score of 700 or higher, and who make a down payment of at least 5%.

President Obama is proposing changes to the FHA, Freddie Mac and Fannie Mae. These include higher downpayment requirement of 30%, whereas currently these are often as low as 3.5%, and FHA loan limits reverting back to $625,500.

Potential homebuyers may want to weigh whether the additional mortgage costs will cancel out waiting for further price reductions on available homes, more so as Twin Cities housing prices begin to stabilize.

View the WSJ article online: http://online.wsj.com/article/SB10001424052748704520504576162632959543492.html

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