The changes of Spring are coming

Even though parts of the country are still being battered by winter storms, the spring season is approaching. Spring time brings a lot of changes… flowers bloom, animals come out of hibernation, rates change, and lender guidelines are modified. (well, OK, so the last two change on a regular basis, but I needed a theme for the post … Let’s take a quick look at rates and guidelines.

Believe it or not, the current trend at the end of last week had mortgage rates going down. How long?… How low? Honestly, I have no idea. No one knows exactly what is going to happen, but we can look at the current trends to get an idea of what is likely to occur.

Rates have been nothing but volatile since the last Fed rate cuts from the end of January. Today has been no different as the market has dropped over 30 points and rebounded to be only down 10 points, and by the time I write this post, the market is down 25 points. ALL OF THIS is taking place in the first two hours of trading today (Monday).

Aside from mortgage rates continuing to be volatile, there are a few things to know about changes in lender guidelines along with a couple of other points.

1 — Jumbo loan limits are soon to increase. The economic stimulus package has been passed and will now go to HUD for review and to determine the exact loan amount. The new loan amounts should go in to affect on July 1, 2008. This will likely raise the conforming loan limit to somewhere around $650,000.

2 — 100% financing guidelines continue to become stricter (and may temporarily disappear entirely). Some investors have already “unofficially” declared Georgia as a declining value market and have reduced their max Loan-to-Value by 5%, effectively making 100% financing, 95% financing. If you are working with a client OR personally looking for 100% financing (no matter what their credit score) — if you are under contract, you should lock-in and protect your rate (and loan program) immediately. First it was the 80/20 disappearing; now it is 100% MI. More on this as things develop.

3 — Anyone in an ARM should consider refinancing into a fixed rate mortgage. With rates still near historic lows, this is a great time to get into a fixed rate loan. As inflation continues to become a bigger story in 2008, mortgage rates become more likely to rise.

4 — Speaking of inflation, all of the economic indicators have inflation above the Fed’s target range of 2%. These figures will most likely only get worse as the impact of the Fed rate cuts take hold. Most economists feel it takes about 6 months to see the impact of rate cuts. Currently, we are seeing the results of the first rate cut from the summer of 2007. What is going to happen once the big January cuts have an affect? (see my previous posts here and here for more details)

5 — Which way are rates going? The shorter answer — it appears the new trading range of mortgage rates is going to be 5.5% to 6.5%. Anything in the 5’s would be worth locking-in for anyone looking to refinance OR any buyer under contract to close in 30 days.

As always, check back with the Blog Pertaining to the Acquisition of a Mortgage to Purchase a Domicile for updates on rate trends, guideline changes, and more in the coming weeks and months!

Clay Jeffreys is a Mortgage Consultant with Hillside Lending, LLC and writer for “Blog Pertaining to the Acquisition of a Mortgage to Purchase a Domicile.” Hillside Lending seeks to provide mortgage brokerage services with the highest standards of service, care, honesty, integrity and value; concentrating on owner-occupied, residential financing. For more information about available programs and interest rates, please visit www.hillsidelending.com.