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If you had been preparing to buy a home this summer, you may be relieved to know that you have not missed the boat on low mortgage rates. (Bing: Where are mortgage rates right now?)
It may still be hard to find the home of your dreams with the limited inventory for sale. But at least when it comes to getting a mortgage, you might have more options as lenders loosen some of their standards.
Borrowers who are self-employed, or who need larger mortgages, are often told that loans are hard to get. But a new wave of creative lenders offers options for these customers.
Other buyers have small down payments, so they need Federal Housing Administration loans. They can get discounts for getting counseling about the responsibilities that come with homeownership.
Here are some of the housing trends you should expect to see this summer.
1. Mortgage rates remain surprisingly low
Mortgage rates have surprised many industry observers who expected rates to rise this year. Rates remain near the bottom and it is unlikely they will spike this summer.
"Rates are falling as a direct relationship to the fact that the economy is not healing as fast as everybody thought it would," says Anthony Hsieh, CEO of loanDepot.
The Mortgage Bankers Association's latest forecast says the 30-year fixed rate could average 4.9 percent by the third quarter and reach 5 percent by the end of 2014.
But there's a good chance rates will remain stable through the summer, says Peter Grabel, senior mortgage loan originator for Luxury Mortgage Corp. in Stamford, Connecticut.
"I don't feel there's any reason for rates to change a lot," he says. Still, if you like the rate you have today, don't waste time. "They are not that much off all-time lows. There's only room for them to go in one direction and that's up."
2. Lending standards loosen up
Getting a mortgage these days is obviously not as easy as it was during the housing boom, when pretty much anyone could get a loan.
But after years of tightening, it seems like the standards are loosening up a bit.
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"We are seeing underwriters have a little more flexibility with some common-sense issues," Grabel says. "That's not a suggestion we are going back to the old days."
Standards have loosened mostly for larger loans, or jumbo loans, because they are not the types of loans that get sold to Fannie Mae and Freddie Mac. The institutions have their own guidelines and lenders must follow them if they want to sell the loans after they issue them.
Mel Watt, the new head of the Federal Housing Finance Agency, recently said his office will change some of the guidelines to allow lending to borrowers with slightly lower credit scores. The FHFA oversees Fannie and Freddie.
"Mel Watt reversed course for the first time in many years to say we have to loosen the current lending standards," Hsieh says.
Some lenders also are allowing lower credit scores on FHA loans. Many lenders required borrowers to have a credit score of at least 640 for an FHA loan.
3. Creative, non-QM mortgages emerge
When new mortgage regulations were implemented this year, many lenders said they would not lend outside the guidelines provided by the Consumer Financial Protection Bureau's qualified-mortgage rule, or QM.
They said it would be challenging for many borrowers to be able to get approved for a home loan once the rules went into effect.
Loans that meet QM's requirement offer lenders a certain level of protection against borrowers' lawsuits. But now that lenders are slowly becoming more comfortable with the rules, some are once again offering creative loans that don't meet QM requirements.
"There are some places offering non-QM loans," says John Walsh, president of Total Mortgage Services in Milford, Connecticut. "I think you will see more investors enter that space because there is an opportunity there."
Borrowers usually don't know whether or not they are getting a loan that meets QM requirements unless they are told they can't get a loan because of new regulations and the lender explains the details. But it is helpful for certain borrowers, including some who are self-employed and those seeking larger loans, to have access to lenders that go outside the QM lending box.
In other words:
1. Mortgage rates remain surprisingly low (You can borrow tons of money to buy a house)
2. Lending standards loosen up (If you work at Wall Mart and make $15k per year you can buy a mansion).
3. Creative, non-QM mortgages emerge (OK, we’ll even let you borrow all you want using your dog’s life insurance policy as collateral)
4. Discounts on FHA loans (the Government wants you to borrow insane amounts of money that you can never pay back, just like they do)
5. Home prices take summer break (houses will never be cheaper than they are now. You’re a fool if you don’t buy at least three houses.)
Let me guess, this article was written by a real estate broker or mortgage lender.