| Big changes are expected in the mortgage | | | | you would qualify for today. And now lenders |
| market for 2008. With rates so low, now is a | | | | will have to pull your credit to actually |
| good time to weigh your refinance | | | | give you a hard and fast quote. If you have a |
| options..... | | | | good idea of what your credit score is, you |
| | | | can compare lender's quotes more effectively. |
| Have you been reading the papers or listening | | | | But if you haven't a clue as to what your |
| to the news lately? (Ok, I guess you have | | | | credit score is, a lender will have to know |
| been because you are reading THIS paper. Just | | | | it in order to be on target with a quote. |
| call me Master of the Obvious). Rates are | | | | |
| low. Actually, rates are really quite low. | | | | And there's more. Although pundits say the |
| You may be considering refinancing in the | | | | rates will stay low (and no, I'm not a |
| next couple of months. Maybe you need equity | | | | pundit), another cost will be passed on to |
| from your home but you're hesitant to touch | | | | the consumer that will begin to be realized |
| that great rate you got a couple of years | | | | by many lenders very shortly. As a result of |
| ago. Or, maybe you're sure you want to | | | | recent increases in foreclosure rates, Fannie |
| refinance but are waiting for the latest news | | | | Mae has decided to increase its margin in |
| from the "Fed" before you take the plunge. | | | | order to maintain adequate capital reserves |
| Well, there are a few reasons why you may | | | | for federal regulators. And Freddie Mac is |
| want to take action sooner than later. | | | | expected to follow suit, although the |
| | | | announcement is not official as of the date I |
| Fannie Mae and Freddie Mac, the major lending | | | | am writing this column. It may be official by |
| institutions for non-government loans, have | | | | the time you are reading it. Even if rates |
| recently announced that they will move to | | | | remain stable through the upcoming period, |
| risk based pricing in the new year. What is | | | | increased margins mean higher effective rates |
| risk based pricing and why do you care? This | | | | to consumers. Thus, if you are mildly |
| announcement means that loans with higher | | | | considering a refinance for whatever reason, |
| risk characteristics will receive a higher | | | | you should really decide now if it's right |
| rate. In the recent past, risk based pricing | | | | for you. Waiting too long could cost you |
| was typically reserved for non-conforming | | | | money. |
| loans, or loans that were outside | | | | |
| conventional guidelines. In 2008, you can | | | | Of course, refinancing has to make sense. You |
| expect to see risk based pricing passed on to | | | | need to consult with a reputable mortgage |
| conforming loans. What constitutes a higher | | | | lender who can help you analyze your options |
| risk? First and foremost is your credit | | | | and choose what's right for you. You need to |
| score. If your loan to value is greater than | | | | weigh the savings against the closing costs |
| 70% - your rather healthy credit score of 680 | | | | and also take into consideration how the |
| won't get you the same rate that your | | | | refinance may or may not benefit you. But, |
| neighbor's 720 credit score will get him. | | | | don't drag your feet. Do your homework. Get |
| Same goes for your sister and her 620 credit | | | | your ducks in a row. And finally, the risk |
| score. Her mortgage rate will be much higher | | | | based pricing and all that other stuff I |
| than yours. Fannie and Freddie will assess | | | | discussed will also apply to new home |
| tiered "hits" or cost increases to borrowers | | | | purchases (but not select first time |
| based upon their credit scores. That could | | | | homebuyer programs- they remain the same). |
| make a huge difference in the rate you will | | | | Whatever type of mortgage you are |
| be quoted in December and the rate you would | | | | considering, now is the time to investigate |
| be quoted next year. It may also mean you | | | | before the changes occur. |
| might not qualify for a loan tomorrow that | | | | |