reno sparks housing market

market change

There is a major change on the horizon for homebuyers and I don’t want you guys to miss your chance to get around this change, so make sure that you’re paying attention to this information that I’m about to share with you.

Fannie Mae and Freddie Mac have recently released their new loan level price adjustments, so you’re probably wondering what the heck that is and what it means for buyers, and I’m about to tell you, so stay with me. Before we get into all of that, I want to preface this by saying that the right time for you to buy or sell a home is when it’s the right time for you. I’m by no means trying to pressure you, however, if you’re one of those people who is on the fence and trying to plan when you’re going to buy within the next year, you’re really going to want to read this because timeline is going to be important if you are making considerations within the next calendar year.

So, here’s what I have for you. The new loan level pricing is going to go into effect on May 1st of this year, though we may be seeing some signs of it kind of coming into play before then, and this is what that’s going to mean. I really want to emphasize that if you get nothing else from this post, if you get no other takeaways, just please keep it in the back of your mind that it’s going to benefit you financially (in most cases), to get into a home and close on it before May 1st. With our average escrow period in our market here of 30 to 45 days, that means that you’re going to want to start getting your pre-approvals and start the shopping process almost immediately.

So, keep that in mind as I get into the ins and outs of these new loan level price adjustments. If you do have questions about how to get started, you can book a call with me. We can hop on a quick call and I can just understand where you’re at, what your needs are, what you’re looking for, and what your timeline might look like, and from there I can advise your next and best steps and help you come up with the best strategy so that we can get you into the home that you want and need and desire, all within the right timeline for you.

So, what are these new loan level price adjustments, what is changing, and what implications will that have on buyers? The first change is that your credit score and how it will impact the cost of your loan is about to change. Right now, and for people who are closing on homes before May 1st, if you have a credit score of 740 or higher, you are good. You’re golden, you’re good to go. That’s kind of the end of the conversation. However, with the new price adjustments, there are now going to be improvements at score 760 and 780. So, you’re really going to want to get in and get your rate locked in now and have the deal closed before May 1st, especially if you’re in that mid-credit score range.

Another major change with loan level price adjustments is going to be loan-to-value ratio. That means anyone with a credit score of 680 or higher, which is the vast majority of people who buy, who borrow to finance a home, are really going to be feeling the impacts of this change. Here’s what I mean. If you plan to put between 15 and 25 percent down, which is pretty typical for a conventional loan, (so that is a whole lot of buyers in our market,) you are going to feel this change significantly. It’s going to be a lot more costly for you to borrow money. On the other hand, buyers who only put down three to five percent, (which is usually first-time home buyers and FHA loan product users), those people are actually going to get a better rate.

So, that one could go either way. You could end up with a lower loan level price adjustment. This change and this metric here appear to me to be something that Fannie and Freddie have put in place to have an impact on affordability. So, people with a lower credit score who put less money down are going to be rewarded or given a better price than they are right now, whereas people who have a mid-level to higher mid-level credit score and are putting more down are actually going to be penalized in ways that they are not being penalized right now.

So, that to me means that these are measures to try to give more of an upper hand to people who may be struggling to purchase a home. I really can’t knock that. I think that’s a noble effort and I know a lot of people who are struggling with that, so that’s great news for them. But what I can say is that if you’re in the vast majority of borrowers, you’re going to want to leverage the current tiers for pricing and get in and close before May 1st.

The other change that really needs to be explained to you is the debt to income ratio. Come May 1st, anyone with a debt to income ratio of 40 percent or higher will see a much higher loan level price than they do right now, so you’re going to want to get in if that is you.

Here’s the bottom line. If your credit score is 720 or higher, you are going to want to make your purchase and have it close before May 1st or it’s going to be a lot more expensive for you. I’m especially thinking about people who keep telling me the rates are going down, and they are waiting until they bottom out. That’s great news and I do believe that they’re going to keep going down.

There are going to be a lot of factors outside of loan level prices that you want to think about too. For example, competition. When rates go down for you, they go down for everyone. That means you are competing with other consumers, which means that the price tags will be driven up. So, either way you look at it, you’re probably going to be paying for it one way or another, but I can tell you that this is like black and white. It will come into play, it does have a firm deadline, and this is not something that I’m magically predicting, this is a fact. (And if you’re not ready to buy a home, that’s totally okay.)

My job is to meet you where you are at and offer you the best advice that I can and help inform a solid decision. If you can’t get in before May, you may want to talk to your lending partners about manipulating the numbers so that you potentially maybe get a better rate for putting less money down. That is seemingly the way that things are going to work after that time period.

Like I said, you can book a call with me to get started. It’s no obligation and totally free. 

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