Mortgage Checkup



Interest rates continue to be in a narrow range, being pulled in different directions depending on the events of the week. Generally speaking, turmoil and unrest in the world create anxiety. Anxiety causes the markets to gravitate to bonds, which tends to help rates go down. When the markets highlight the strengths in the economy, rates tick up. When the markets concentrate on political instability, then bonds and rates gain favor.

When events in Egypt quieted down and Libya, although far from settled, seemed manageable, the events painted a picture of relative stability for investors. This triggered a flight to stocks and money came out of the bond markets. So rates started to move higher again.

The housing markets continue to sputter. House prices are stable to moving slightly higher in the Washington, DC marketplace. Once outside of the DC metropolitan area, the housing markets tend to be less stable, with prices stable to declining.

Condominium pricing is still trying to find stability. One trouble spot for condos these days are the strict rules Fannie Mae and Freddie Mac have on approving condominiums. When owners have a difficult time selling their unit, many owners turn their condos into investment/rental units. If too many apartments turn into rental units then the investor ratio can get out of whack. If this happens it can be difficult for Fannie Mae or Freddie Mac to write mortgages on the property. Another item one has to keep in mind is the budget for the condominium can be put at risk if there are any delinquencies in the property. This can temporarily wreck condominiums reserves.

Underwriting standards remain strict. Full documentation is required on almost all loans these days and account for most of the mortgages being underrated today. Standards do remain strict.

Credit standards remain high. In order to get the back rates on conventional loans it takes a credit score of 770 or higher to get the best rates. When credit scores get significantly lower then the fees and ultimately the pricing is more expensive. This is why it is a good idea for a homeowner to get a copy of their credit report every couple of years or so. If there is a problem with the credit report, a consumer can get it repaired. If problems are left alone the credit scores will continue to stay low or go lower.

Housing continues to lag. The Federal Reserve noted that the real estate markets showed “some gains from still weak levels”.

Oil prices may prove to be a drag on the overall strength of the economic recovery. It will be interesting to see how the spike in oil will affect interest rates. Stay tuned.

Bill Starrels lives in Georgetown. He is a mortgage banker who specializes in purchase and refinance money. He can be reached at 703 625 7355,

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