Real Estate Insider Blog
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For most Americans, the purchase of a home is made possible with a mortgage. However, saving a 20 percent down payment is an unattainable goal for many would-be buyers in areas with high home prices. Compounding the challenge are strict underwriting requirements, including some that were put into place to protect the housing market from a crash. Underwriting is the process mortgage lenders use to determine whether to approve a loan, based on the borrower’s risk profile.
The Federal Housing Administration, or FHA, loan program was created to help Americans buy homes following the Great Depression, and it remains a popular choice for people who need an affordable mortgage option. FHA loans are a popular solution because they allow for smaller down payments, while also resolving some of the underwriting challenges borrowers face. FHA mortgages are made by lenders and insured by the Federal Housing Administration, a U.S. government agency. With a government guarantee, the lender can offer more flexibility in its underwriting requirements, including credit guidelines and the size of the down payment.
“If a borrower has good credit but limited cash on hand, other government-backed loans are available for less money down,” says Stephen Moye, senior loan officer for Citywide Home Loans. “For a borrower with a bankruptcy, foreclosure or other credit issue, the FHA loan has a much lower barrier to entry.”
This guide ...
Tuesday, May 31, 2016
What's going on and why does it matter?
Mortgage bonds opened lower today, and are sitting right at their 100-day moving average, which has been operating as a strong level of technical support over the past few weeks. This is a big week for the markets with lots of high-tiered economic reports that may sway the market wildly one way or another. Of particular interest is Friday's non-farm payrolls report, preceded on Thursday by an OPEC meeting on oil, and an ECB meeting on European monetary policy. If the economic reports are favorable this week, the Fed may be more inclined to increase rates in June. If this happens, the Fed may bring an end to their mortgage bond buying program sooner rather than later. The Fed is scheduled to purchase up to $1.4 billion in GNMA mortgage bonds today, and they'll be purchasing up to $2.375 billion in 30-yr conventional mortgage bonds tomorrow. Today's personal income and core inflation numbers came out in line with market expectations. However, expect lots of volatility this week as the market deals with the deluge of economic reports that will be released in the coming days. In the midst of all this, it'll be interesting to see if mortgage bond prices can hold above their 100-day moving average. If they break below that level, the next hard stop on the way down will be their 200-day moving average,...
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