July 18th Moorings

Hello and welcome to this week’s edition of Moorings, your source for local and national news from the Mortgage Industry. Let’s jump right in to rates which have come down yet again to 4.5% for a thirty year fixed conforming loan. This is an exceptionally good deal for anyone looking to purchase or refinance a home. Rates have only been this low a handful of times in the history of the mortgage industry and anyone who doesn’t take advantage of this opportunity will surely regret it. As to why rates are so low, we jump over to the national economic news.

Obviously the biggest story on the news of late has been the ongoing struggle between democrats and republicans to agree or not to agree on whether or not the debt ceiling of the United States should be extended. In the simplest terms, this is a limit as to how much debt the country can go into, and congress must approve the end amount of debt allowed. With major economic issues like this that negatively impact the economy, investors move their money from riskier arenas like the stock market into more secure investments like mortgage backed securities. With this move come lower interest rates as there are more buyers of these packaged securities and therefore less risk.

On a separate topic, I wanted to discuss a rarely used loan program called Pledged Asset. This is a great program for borrowers looking to purchase or refinance higher value homes, whose assets and income may not be your standard W-2 income. A good example of a use for this program is a client with a great deal of money in stocks, bonds, mutual funds, etc., but they don’t necessarily have tons of cash on hand to buy a home. By utilizing this creative loan program, the client can “pledge” their assets that are tied up (and not normally utilized) as collateral when purchasing a home. This saves a client from needing to make liquid their investment portfolio which will inevitably make them more money than cash. In addition, a client can pledge their assets for another person such as a child or parent, you can get financing up to 90%, mortgage insurance may not be required in some cases, and you can defer capital gains since the investments are staying in place. Loan programs like this are designed for a borrower with a more complicated asset and income structure and it makes it all that more important for such a client to work with an experienced mortgage banker. When you are discussing making a huge investment such as a personal residence or vacation home, make sure your mortgage advisor knows the ins and outs of the guidelines of your mortgage program. At the end of the day it’s your name on the mortgage and you are responsible for it, so be comfortable with the decisions your making and the contracts you are signing. Well that’s it for this week, until next, Be Blessed and Numbers 6:24-26 be on you.