Loans of Choice Also Have Cycles
August 27, 2008
It is interesting to note that in this down cycle of the real estate marketplace, most foreclosing loans are of the conventional type, usually part of a Fannie Mae or Freddie Mac portfolio. In our Inland California market area, we see few HUD(FHA) foreclosures and even fewer VA foreclosures. During the rising real estate market, most loans were 80% conventional first trust deeds combined with a second trust deed or an equity line of credit. The borrower was able to achieve 100$ financing with no mortgage insurance premium. Those loan products are never, or very rarely, available today.
Today the loans that lenders are touting to borrowers are FHA with its low down payment (presently 3% but going to 3.5% on October 1, 2008) or VA with zero down payment. Until January 1, 2008 the maximum VA loan is $729,000. Certainly high enough for many great properties. Since we have many veterans in our area, this could be a great time to make use of VA eligibility since conventional "jumbo" loans are very difficult to obtain and carry a high interest rate.
FHA loans do have an insurance premium that the borrower must pay. Up front it is presently 1.5% of the loan amount, but shortly going to 1.75%. (Notice how often I am saying "presently, but").
The credit markets are very volatile and as they make attempts to stabilize and cut their losses, the loans they are willing to give are in a state of flux. Those of us who have been in the real estate industry for over 30 years do remember the 1080s when interest climbed to 22%. The interesting thing about those times was that folks still were willing to purchase a home. We are certain that folks will still choose to be homeowners as they adjust to the new credit environment.
It is interesting to note that in this down cycle of the real estate marketplace, most foreclosing loans are of the conventional type, usually part of a Fannie Mae or Freddie Mac portfolio. In our Inland California market area, we see few HUD(FHA) foreclosures and even fewer VA foreclosures. During the rising real estate market, most loans were 80% conventional first trust deeds combined with a second trust deed or an equity line of credit. The borrower was able to achieve 100$ financing with no mortgage insurance premium. Those loan products are never, or very rarely, available today.
Today the loans that lenders are touting to borrowers are FHA with its low down payment (presently 3% but going to 3.5% on October 1, 2008) or VA with zero down payment. Until January 1, 2008 the maximum VA loan is $729,000. Certainly high enough for many great properties. Since we have many veterans in our area, this could be a great time to make use of VA eligibility since conventional "jumbo" loans are very difficult to obtain and carry a high interest rate.
FHA loans do have an insurance premium that the borrower must pay. Up front it is presently 1.5% of the loan amount, but shortly going to 1.75%. (Notice how often I am saying "presently, but").
The credit markets are very volatile and as they make attempts to stabilize and cut their losses, the loans they are willing to give are in a state of flux. Those of us who have been in the real estate industry for over 30 years do remember the 1080s when interest climbed to 22%. The interesting thing about those times was that folks still were willing to purchase a home. We are certain that folks will still choose to be homeowners as they adjust to the new credit environment.
posted by shirley harry at 8:51 AM
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