Freddie Mac VP Patricia McClung on what is needed in this economy for potential home buyers to get a mortgage.
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Mortgage interest rates continue to see new record lows, hitting rates not seen since the 1950s. But brokers say few of the many homeowners rushing to take advantage and refinance their loans will be able to qualify.
The high levels of unemployment and depressed property values in many parts of the country have made it tougher for many borrowers, and lenders are demanding better credit histories and proof of income before they'll refinance a loan. Only about half of those looking to refinance may actually qualify for a loan — far lower than before the housing market bust, mortgage brokers say.
Still, for many borrowers who don't face those problems, the rush to refinance is on.
Applications for refinancing are up nationwide. According to Freddit Mac, four out of five conventional loan applications and more than half of FHA and VA loan applications over the past month were for refinancing.
To see if refinancing makes sense, borrowers should divide the fees they pay to refinance their loans by the monthly amount they'll save. That will tell them how many months they would have to live in the home to recoup the expense of refinancing.
Tougher standards are affecting even some folks with sterling credit seeking new mortgages. Lenders want borrowers to have a 740 credit score or higher to qualify for the lowest-rate mortgages loans. Two years ago, a 680 score would suffice.
Lenders also now require full documentation of a borrower's income, unlike during the housing boom when "no documentation" loans were often called "liar loans." And some are requiring borrowers to re-verify their income in the time between the application and final approval.
Many economists expect mortgage rates to remain low heading into 2011, but many warn that outlook could change if inflation, which is pretty much absent today, comes roaring back.
The door that was once wide open to homeownership closed a bit recently when a key government agency announced a proposal to no longer allow mortgages for borrowers with credit scores below 500.
The Department of Housing and Urban Development (HUD) said that it intends to require borrowers to have scores of at least 500 to qualify for FHA-insured loans. The agency has not required a minimum score before.
The practical impact of this move will be extremely limited; during the second quarter of 2010, no FHA-insured loans were issued to borrowers with sub-500 scores. And, in fact, less than 1% of borrowers were below 580; most loans went to borrowers with scores above 620.
HUD has been expressing increasing concern over default risk in the wake of the housing bust. The percentage of delinquent FHA loans has trended up, as have rates for virtually all mortgage loans.
The FHA had earlier proposed steps to reduce delinquencies and so therefore cut risks. One was to raise the minimum downpayment to 10% for borrowers with credit scores below 580.
Another was to reduce allowable seller concessions to no more than 3% of the sale price. That would force buyers to make more of a financial commitment to their home. It is generally believed that given more "skin in the game," homeowners are less likely to default.
These policies are all still in the proposal stage. Before going into effect, the department is soliciting public comment on the matters for 30 days. Then, it will evaluate the comments before implementing any changes.
Repairing water marks on a ceiling is not a particularly difficult thing to do if you know how to do it properly, but before you begin your repairs, make sure whatever was causing the damage has been fixed. Ceiling damage can occur from a leaky roof, an overflowing bathtub or even a leaking pipe. So check your roof for leaks or a problem with the flashing. Make sure caulking around the bathtub and shower is thoroughly sealed. Generally a leaking roof will only damage the ceiling on the top floor of a house, so if you have a two story house and you see water damage on the first floor or even the basement ceiling, it is most likely caused by something else. Regardless of where the water damage appears, before you begin repairing it, make sure the true cause of the leak has been found and repaired.
Measuring the Damage
At its simplest level, you can repair a water stain on the ceiling by sealing it and repainting the area to match the rest of the ceiling. Before you start painting though, you will need to assess the ceiling to see if a drywall repair is in order. Sometimes when the drywall of a ceiling has been softened by water, it will be mushy or crumbly and will not hold paint properly. In this case you will need to cut out the damaged section of ceiling with a utility knife and replace it with a new piece of drywall. When you patch a ceiling in this fashion, make sure your drywall compound has thoroughly dried before trying to paint it. Any time the drywall has been damaged to the point of being crumbly, make sure to replace the damaged section before painting.
Light Stains
For less severe water damage you can try bleaching the area and skip repainting all together. To treat the ceiling with bleach, pour some bleach into a small container and lightly dab it onto the stained area of ceiling. You may have to apply it several times before the stain completely fades away. If a little touch up is needed, you can use white chalk or ceiling paint.
Severe Stains
For areas of the ceiling that have sustained heavier water damage, you must first be sure the ceiling is completely dry and not crumbly. Then use a good quality stain blocking primer to seal the area and keep the water stain from bleeding through the paint. When you are selecting the best primer to use for this job, look for a primer designed especially to seal out stains. After the area has been sealed, then you can paint the ceiling. Remember to let each layer of primer and paint dry completely before adding the next layer to the ceiling.
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Four ways the newly passed financial reform bill could make you poorer.
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