New ‘silent second’ could be your best shot at homeownership – Orange County Register

What’s up with mortgage rates? Jeff Lazerson of Mortgage Grader in Laguna Niguel gives us his take.

Rate news summary

From Freddie Mac’s weekly survey: The 30-year fixed rate dropped to 3.82 percent, the lowest rate since last November. That’s four basis points better than last week’s 3.86 percent. The 15-year fixed also improved, landing at 3.12 percent, four basis points better than last week’s 3.16 percent.

The Mortgage Bankers Association reported a 2.3 percent decrease in loan application volume from the previous week.

Bottom line: Assuming a borrower gets the average 30-year fixed rate on a conforming $424,100 loan, last year’s rate of 3.46 percent and payment of $1,895 was $85 less than this week’s payment of $1,981.

What I see: Locally, well qualified borrowers can get the following fixed-rate mortgages at zero points: A 15-year at 2.875 percent, a 30-year at 3.625 percent, a 15-year agency high-balance ($424,100 to $636,150) at 3.125 percent, a 30-year agency high-balance at 3.875 percent, a 15-year jumbo (over $636,150) at 4.0 percent and a 30-year jumbo at 4.125 percent.

What I think: The FHA deal of the decade for one or two-unit properties has launched for Orange County and all California home shoppers. And it has no restrictions regarding property location, income or previous ownership.

Under this new product, a non-profit agency provides a second Federal Housing Administration mortgage with a 3.5 percent minimum down payment.

And if your income is less than 115 percent of the AMI or area median income ($97,750 in Orange County), there are no payments on the second. If you make all your first-mortgage payments on time, the second lien goes away after three years.

To learn what the AMI is for other California counties, see www.huduser.gov and click on Income Limits Data.

If you require a non-occupant co-signer to make the income and debt ratios work or if you are receiving rental income (when buying two units and renting out the second unit), these income sources are not counted against your AMI cap.

If your household income exceeds the county AMI cap, then the 3.5 percent soft second down payment provides you a 10-year repayment amortization plan at zero interest rate or a 30-year plan at a 5 percent interest rate.

Such a deal!

A middle credit score as low as 620 is good enough.

No homeownership counseling classes are required.

Not one penny of borrower investment is required. FHA allows up to a 6 percent home…

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