12/14/2023 – rates and early payoffs – pay points or not?

The Federal Reserve shut its mouth, and the numbers look good for lower rates for most of next year! YAY! After a flat CPI on Tuesday, the dot plot numbers hit yesterday, and rates got slightly lower, which is excellent news!

With rates falling and likely falling again next year, this would be an excellent time to get a 0-point loan, but the lenders are making that a little more challenging, and here’s why! When we close a loan, we can hold it for servicing or sell it off in the secondary market to someone who wants to service it. Generally, we sell our loans off in the secondary market, and someone else services them, which takes the early payoff risk away from us as Mortgage Bankers. The problem is that banks buying these loans do not want 0-point loans because they have to pay us a commission, and that loan will likely pre-pay quickly with rates going down.

A Loan Officer cares about early payoffs as they lose the commission they earned if a loan pays off in 6 months or less.

So what we are seeing now is a 0-point loan is .375- .50% higher than a 1-point loan in many cases. The normal range is .250%, and as rates go lower, it becomes even more tempting for a buyer to pay a point. Buyers should not pay a point if it can avoided! Qualification and credit scores could affect that, but the breakeven is about 28-39 months, depending on the rate difference.

Remember that all Loan Companies and Loan Officers have struggled this year, and having your clients pay off a loan in less than 6 months would hurt them even more, so be kind to your business partners! LOL!

Condo / Townhome issues we know of now. Properties can be financed with 10% down and are considered NON-WARRANTABLE:

1. American Beauty Village – West has insurance issues – East will get renewed February 28, 2024, and will likely be deemed non-warrantable at that time.
2. Scenic Hills – Insurance
3. Mariposa – Litigation semi-cleared! Insurance a mess!
4. Bouquet Canyon Village – Insurance
5. Madison – Litigation – I heard an FHA loan closed in there! I am trying to find out if it is an underwriter error, or will it be okay to do FHA loans there? By the way., this is on the naughty list for Fannie and Freddie!
6. West Creek / West Hills – Insurance
7. Cornerstone – Insurance
8. Canyon Oaks – Insurance
9. Brookside Walk – Insurance – NEW as of last week
10. Shadow Ridge – Oak Park – Insurance
11. Cabrini Villas – Burbank – Insurance
12. Sierra Glen Condos – Insurance
13. American Beauty Condos – The brown ones – Insurance – 50 Mil in coverage for 748 units is not nearly enough!

Las Ventanas – Litigation cleared – NO LONGER ON THE NAUGHTY LIST!!! REPAIRS HAVE BEEN MADE!!!  

Please let me know if you hear anything new on condos or townhouses.

The CPI number we have all been waiting on came out today, which was in line with what was expected. Rates have bounced around a bit today, but nothing too wild. We have come a long way in the past 40 days, and more work is in front of us. We will not go down in a straight line, but rates will go down, and prices will go up! LOL!

• 12-day escrows if your buyer is pre-approved - Conventional / FHA / Jumbo / Bridge
• We do loans in all states, so call me with anything you need.  
• Government Loans (FHA / VA) are in the high 5’s and low 6’s
• Conventional Loans up to $765,550.00 are in the low to mid 6’s
• High Balance Loans $765,550.00-$ 1,148,325.00 are in the mid to high 6’s
• Jumbo loans above $1,148,325 are in 6’s
• Bank statement loans - They are available with 10% down again! 8’s and 9’s depending on down and credit score.
• No income qualifier – 40% down with reserves! In the 8’s!
• 0 down loans are in the high 7’s – 660 credit score min right now, up to $740,000.00.
• Private Money lenders - hard Money Loans – 35% down!
• No Ratio Loans 30% down
• Debt Service Coverage loans with as little as 25% down
• Bridge Loans - typically 7.500% with limited fees – and they get you where you need to go!
• 0 down California Dream for all Equity Share – Postponed until February 2024???
• 3/2/1 Buydowns 2/1 Buydowns and 1/0 Buydowns are available at great start rates!

Interest rates are subject to change without notice! Above are LA County Loan Limits.

I am available all weekend if you have any questions or if someone is interested in buying a property! My cell is 661-714-6258, and my office line is 661-260-2970 ext. 2222. Please text (661-714-6258) or email me at Mike@AugustaFinancial.com.

Have a great day and an even better tomorrow! Please call me when you have a client who needs to borrow!