Mortgage world wild
Jumbo rates rising, conforming loans available, professionals say
November 2, 2008
The mortgage climate is so volatile that a mortgage rate advertised at 8 a.m. can change several times by 5 p.m.
Mike Larson, vice president of Mountain Valley Bank in Steamboat Springs, sometimes gets three e-mails a day with three different interest rates from a single lender.
“If people are rate-shopping, they not only need to make sure they’re comparing apples to apples among banks on the same day – even that’s not good enough – they need to make sure they’re comparing rates at the same hour,” Larson said.
Those rates are tied to the yields on Treasury notes. When the yields go up, mortgage rates go up, Larson said. When they go down, rates go down. That means loan officers must carefully track Treasury notes to make sure they get clients the best rates, he said.
That volatility makes for a wacky time in the lending industry. But despite the near-death experiences of mortgage behemoths Fannie Mae and Freddie Mac, plenty of conforming loan products are available to people with a steady income and good credit, loan officials said.
“It’s difficult, but there are absolutely some mortgages out there,” said Josh Kagan, a loan officer with Yampa Valley Mortgage.
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But jumbo mortgages have become a challenge. In Routt County, a jumbo mortgage is classified as a loan of more than $675,000. Mortgages between $417,000 and $675,000 are classified as agency jumbos, Larson said, and come with lower rates.
“For instance, a 30-year fixed on a jumbo mortgage is somewhere (near) a full percent higher than a conforming mortgage, where in the past it might be a quarter percent higher,” Kagan said.
The federal government increased the $417,000 limit on jumbos in some regions as part of the economic stimulus package this year, Larson said. The change is set to expire at year’s end.
“There’s talk of increasing the jumbo limit across the board next year or the conforming limit across the board for next year, but I haven’t seen anything that’s definite yet,” Kagan said.
Although he didn’t encourage people to snag adjustable-rate mortgages, Kagan said they might be a smart choice for some.
“Depending on the type of loan, maybe a jumbo loan, you might be better off on an ARM,” he said. “Once the economy returns to somewhat normalcy, there’ll be a market for jumbos again, and that rate will come down, and you’ll be looking to refinance anyway.”
Larson outlined one more positive change in the industry.
The Federal Housing Administration has started giving loans for more costly houses. The agency had limited loans in Routt County to the $200,000s, Larson said. As part of the stimulus package, the FHA raised that to $625,000. FHA-approved lenders can arrange 97 percent loans for homes in that higher price range, Larson said.
Still, things are slow, lenders said.
“We’re getting calls, but the reality is that there’s probably a third of the loan products out there that there were a year ago or a year and a half ago,” Kagan said. “So the deals are harder to do.”
Larson said he expected the market to recover after the Nov. 4 election and in the coming year. People still want to live in Steamboat, he and Kagan said.
“I’m getting a lot of calls,” Kagan said. “If people could sell their house, they’d be psyched to buy another one, but they can’t sell their house. It feels like there’s : some pent-up demand, that once things start moving a little bit, we could see some rebound to a good real estate climate again.”
And the climate is good for buyers who have the money, the income and decent credit.
“I’d definitely call it a buyer’s market right now,” said John McCollum, a mortgage loan officer for First National Bank of the Rockies. “If you compare this summer to last summer, there’s just a lot more houses on the market to look at and choose from. You have the time to look at it and get your ducks in a row. Last year, you had to kind of hustle or someone was going to buy it from under you.”
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