Didn’t see that coming!

There are times when you just know something is going to happen. An example, how about Hillary Clinton being a legitimate candidate for the Democratic nomination? We all knew she wanted to run for president and would have a lot of support toward winning the nomination.

What did we not see coming? Who knew that not only would Barack Obama be a serious challenger to Clinton, but that he would be ahead in delegates at this point in the race!

The same can be said for events in the lending world. Two years ago, 100% financing was very common and all lenders were using these loan programs. The most popular program was a combo loan allowing borrowers to avoid private mortgage insurance (PMI). If a borrower couldn’t qualify for a combo loan, they most likely could still qualify for 100% financing with PMI.

Lenders dropped combo loans in 2007, and now 100% financing with PMI is gone for the state of Georgia. I originally blogged about this being a possibility in early March when the largest PMI company, United Guaranty, announced it would no longer support 100% financing for Georgia. Through the month of March, other PMI companies followed suit. Now, the new maximum loan amount for Georgia is 97% of the purchase price (95% with some lenders).

Even more surprising is rate adjustments for a borrower’s credit score. We all know a lower the credit score means a higher interest rate. Why? A lower credit score indicates a higher risk loan for the lender. Higher risk = higher rate. Typically, the cut off for the adjustment was 680, meaning, that any score above 680 received the same rate.

I mentioned this potential change back in January, and it is becoming more common on lender’s rate sheets. Instead of 680 or even 700, the new cut off point is 720. Even as high as 740 with one lender I use from time to time!

With all the uncertainty in the economy, credit crunch, and lenders being bailed out of trouble by the government, things are not likely to change back any time soon. At some point, 100% financing with PMI will return. We will also likely see credit score adjustments drop back down to 700, but don’t expect any of it to occur until housing and lending markets get out of their current slumps.

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.