August 30, 2022

I have written recently that credit debt is starting to build again, and here we go again! The Federal Reserve announced that credit card debt had increased 13% in the past 12 months. I can spin this 17 ways and tell you that I feel the number is likely higher, but I wouldn’t say I like to speculate. I know that if you have 13% more credit card debt than you did a year ago, your credit scores are likely lower too! Credit scores had increased every year since 2009, when they dropped to an average score of 686. They rose to 716 at the start of this year. With increased debt, we are starting to see lower credit scores again. Lower scores may bring in more first-time buyers using FHA financing than before. Here is a comparison between FHA and Conventional Loans:

FHA:

• Interest rates: Typically lower than conventional –  no upcharge for condo
• Down payment: 3.5% to $970,800
• PMI: Typically Higher than conventional
• Upfront Mortgage Insurance Premium: 1.75% of the loan amount
• Condo approval: You may get a spot approval if complex is not approved
• Detached Condo: No Condo approval required
• Debt to Income ratios: 46.99/56.99
• Credit score minimum: No minimum –  Some restrictions apply
• Married Borrowers: Must run credit for both spouses and hit for the debts
• PMI Removal: Only if you refinance or put more than 10% down originally

Conventional:

• Interest rates: Slightly Higher than FHA - rate is higher for condos than SFR's
• Down payment: 3% down to $647,200 / 5% down to $970,800
• PMI: Typically lower than FHA if scores are above 680
• Upfront Mortgage Insurance Premium: No UFMIP
• Condo approval: Full condo review required with 3 or 5% down
• Detached Condo: No Condo approval required
• Debt to Income ratios: 3% down -45%  /  5% down  45-50%?
• Credit score minimum: 620 minimum
• Married Borrowers: Only need to run credit on the borrowing spouse
• PMI Removal: After 2 years with 25% equity using new appraised value.  After 5 years needing 20% equity or if you pay the mortgage down to 78% of the original appraised value.

I am sure there is more, but I think we covered it. If your client is looking to move-up, maybe we can help them improve their credit scores before they move with our Mini Bridge Loan, which allows us to pay their bills off before they sell so they can have a higher score when they are ready to buy.

Interest rates are still pretty volatile. Rates are down for a day and then up for two days. It’s a nice little system that I hope will change soon. The good news is that today is our second bad day in a row.

1. 30-year Government Loans (FHA / VA) are in the mid to high 4’s.
2. Conventional Loans up to $647,200.00 - low to mid 5’s.
3. High Balance Loans $647,201.00-$ 970,800.00 are in the mid 5’s to low 6's
4. Jumbo loans above $970,801 are in the high low, to mid 5’s
5. 5/1, 7/1, 10/1 Arms are in the low 4’s to low 5’s for over $647,201. Under that, don’t bother right now!
6. Bank statement loans - They are available with 10% down again! 6’s + depending on down and credit score.
7. Stated income loans – I have one bank with 30% down, but everything else has to be perfect! Interest rates are in the high 6’s.
8. 0 down loans are in the 5’s – 620 credit score min right now! Mid 6’s, for the most part, up to $670,000.00.
9. 0 down Jumbo to $975,000.00 – 680 credit score – call for a quote
10. Private Money lenders - hard Money Loans – 35% down!
11. No Ratio Loans 30% down
12. Debt Service Coverage loans with as little as 25% down
13. Bridge Loans - are typically 6.99% with limited fees – But they get you where you need to go!

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

I will be around all week if you have any questions or if someone interested in buying a property! My cell is 661-714-6258, and my office line is 661-260-2970 xt. 2222. Please text me at 661-714-6258 or email me at Mike@AugustaFinancial.com. Have a great day and a better tomorrow! Please call me when you have a client that needs to borrow!