Low Interest, but high qualification requirements make this a tricky time for mortgages
Is it easier to get a mortgage today than say a year ago, or three years ago? Are interest rates going up or down or sideways? What about closing costs and down payments? What kind of credit score do I need today to get a mortgage?
We interviewed Los Angeles Mortgage Broker Bill Rayman of Guaranteed Rate the other day to see if we could get some kind of clear advice regarding how to time a home purchase mortgage or to refinance an existing mortgage.
There is also a lot of conflicting stories about whether this is a good time to buy a home or other residential property for an investment.
RK Is it easier to get a loan now?
BR No, it’s somewhat harder due to procedural issues, not necessarily because of qualifying. One thing that has changed is the number of mortgage products that are available. This does allow a mortgage broker to help find a better mortgage that suits the borrower more exactly.
RK Why is it so hard to get a mortgage?
BR Even though the credit score requirements have dropped, the debt to equity ratio requirements remain tight and the real issue today is paperwork. There are many more compliance issues due to the Dodd-Frank regulations taking effect this year, and the lenders are scrutinizing every document to be sure they meet the most conservative interpretation of vague guidelines. You have to have proof of everything you say, and this can be a problem for some, even well qualified, borrowers.
RK Where do you see housing prices in West Los Angeles in the next few months?
BR I try not speculate on such things. However, there seems to be a little softness right this minute. Will it last? Who knows? Based on history and the low number of homes on the market right now, one would expect the normal bidding wars to commence in April as usual.
RK What about interest rates? Up? Down? Stay the same?
BR Same answer. Interest rates are based on supply/demand and fear/greed just like any other market. Any little thing can trigger a big increase or push rates down another few basis points. Right now, rates have been pretty stable for a while, and the Fed seems to like it that way.
RK Then what criteria should a someone use who wants to buy a new home, trade up, or buy an investment property?
BR That is a question I can answer. With rates at historic lows, don't fret over an eighth of a point. Decide what to do right now based on what serves you and your family best. If you need a home or a bigger home or an investment, find the best opportunity today and go for it. If those purchases are not high on your list of priorities or you think your circumstances could change in a year or two, you may want to hold off. Interest rates have historically averaged around 6%, so even if you wait and get a 6% loan two or three years from now, you can feel like it is a good deal.
RK That sounds like good advice. Anything you want to add?
BR If you get a mortgage now at around 4%, you are almost certainly going to be happy with that decision 5 years from now. And, if it rates drop to 3.5%, we will be happy to get you a new mortgage at the lower rate at little or no cost to you.