On this week’s episode, David and Brian Wickert discuss the latest in mortgage and realty news, and give you an idea of what to expect in the coming months.
This week on the Accunet Radio Show:
Brian and David Wickert give their thoughts on the Housing Reform Plan submitted by the US Treasury Department, which can have measurable changes to Freddie Mac & Fannie Mae. Learn why now might be the time to get a rock-solid pre-approval to buy a home before changes take effect.
This week’s highlights
- The US Treasury Department released a housing reform plan including recommendations to congress and administrative recommendations.
- If certain treasury changes take place, Brian predicts the minimum down payment on a 30-year fixed-rate loan to go from 3% up to 5%.
- SE Wisconsin continues to experience a seller’s market; The municipality with the lowest average day to an accepted offer is in Jackson, WI, with just 7 days between submitting an offer and getting it accepted.
Mortgage industry predictions: Now’s the time to buy
The new housing reform plan from the United States Treasury Department can essentially be broken down into two different lists: recommendations to Congress, and administrative recommendations. Brian predicts the likelihood Congress will change anything is very small. The administrative changes, however, are things people in the housing industry can change without anybody’s permission.
How will mortgage rates change?
There’s no telling for sure whether or not the plan will take effect. However, the chances of getting a solid mortgage will likely decline if things trend toward these changes.
Before the mortgage crisis in 2012, the minimum downpayment for a 30-year fixed mortgage with Fannie Mae went down from 5% to 3%. Then the Flex 100 was introduced, which allowed people to finance 100% of their mortgage. Now, with the current guidelines, first-time homebuyers can finance with 3% down with no income limit.
This new treasury proposal suggests that Fannie and Freddie should first talk to the Federal Housing Administration (FHA) to determine who should be responsible for low down payments. If the treasury suggestions take effect, Brian predicts they’re going to roll this back up to 5% from the current 3% down.
What about a Qualified Mortgage?
A Qualified Mortgage (QM) is a type of loan category that has more stable features, making it easier for homebuyers to afford their loan. Under qualified mortgage guidelines, “safe mortgages” protect those who take out loans by verifying the borrower can pay back the lender. They determine this by making sure no borrower has a debt to income ratio greater than 43%.
For example: If your income is $10,000/mo, you must have a debt lower than $4,300/mo in order to qualify.
At Accunet, the current max they’ve approved for a loan is 49.9%.
The current Qualified Mortgage guidelines expire in 2021. After the changes, they’re going to let you leverage/borrow less money than you can currently. Based on the new debt to income ratio, this is going to affect a third of homebuyers.
Today’s SE Wisconsin housing market update
Home sales in SE Wisconsin are still pretty hot; this means you need to put your best foot forward while making an offer. Let’s take a look at the average number of days between submitting an offer, and getting it accepted in a few municipalities:
|Number of days to
an accepted offer:
|Glendale, Brown Deer, Brookfield
|Vernon, Oconomowoc, Hartford
|Racine, Pewaukee, Oak Creek, Franklin, Bayside
|Whitefish Bay, Greenfield
|West Allis, Waukesha, Greendale, Germantown, Delafield, Cudahy
|South Milwaukee, Burlington
Should I try to save money upfront when shopping for a condo?
Saving on initial home costs doesn’t necessarily save you money in the long run. Accunet had a client who was shopping for a condo in Wauwatosa who qualified for a Fanny/Freddie loan. Traditionally, you’d get penalized for putting down less than 25% on a condo because there’s more risk involved compared to a single-family home. However, since she qualified for a loan and had a credit score higher than 680, the negative pricing problems disappear and she was better off putting down 19.5% on a higher offer because it saved her money in the long run.
All the small details matter when you’re writing that offer! That’s why it’s important to get help from people at mortgage companies who know what they’re doing, like the people at Accunet. We help people understand that overpaying just a little bit can actually work in your favor compared to trying to penny-pinch in such a hot market.
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