-The fourth quarter of 2010 is proving to be a most interesting time in mortgages. Rates are fluctuating at near record lows. House prices are trying to stabilize. Underwriting is as stringent as ever.

With house prices hovering around their recession-driven lows, this is an excellent time to buy a house in the Washington area. You will need some cash, and you will need to be able to qualify for it with full income and asset disclosure.

Underwriters are being very careful when they underwrite mortgages these days. The mortgage application has to be complete, and everything has to be pretty perfect. Credit scores also factor in both the pricing models and underwriting. In non-government mortgages you need very good credit to qualify and excellent credit for the best prices.

One of the best gauges of house prices is the Case-Shiller house price index, released by Standard and Poors. Standard and Poors’ August report revealed that 15 of 20 metropolitan areas in the survey showed a decrease in house values. The District of Columbia was one of five metropolitan areas that demonstrated an increase in house prices.

The stabilization of home prices in DC has allowed lenders to allow for higher loan to values to be used for conventional loans. A year ago most lenders had to lower loan to value requirements
because values were unstable. Appraisals are still problematic, but at least values are stabilizing.

Refinancing is picking up its pace again. With mortgage at or near record lows, a lot of people are refinancing again. Even homeowners who refinanced a year ago are now refinancing again.

The Washington metropolitan area has another advantage over other areas. DC metro is considered
a “high cost” area. What this means is a homeowner can get a conventional or FHA mortgage up to $729,000. In areas not considered high cost, the loan limits are considerably lower, which means those homeowners who have large mortgages will need jumbo money. These typically carry higher rates and are more restrictive. Jumbo money traditionally carries interest rates a half point or higher in rate then a comparable conventional rate. Conventional loans can be sold to Fannie Mae or Freddie Mac. Jumbo loans need to be portfolio by lenders or secured by Wall Street.

Beyond fixed rate loans, adjustable rate mortgages are priced very competitively. The two most popular adjustable rate products are 5/1 and 7/1 ARMs. These are fixed for five or seven years before they adjust. If you are going to move in five or seven years, an ARM can be a great loan.

If you have a mortgage with a rate with a “5” or higher, consider a refinance. You may be very happy after your initial phone inquiry.

Bill Starrels is a mortgage loan officer who lives in Georgetown. He can be reached at 703-625-7355 or emailed at,

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