Rates Improve Marginally Again; Considerations When Keeping Current House

30 Year Fixed Rate Loan at a Cost of One Point: 4.375%*

Rates improved again, as Durable Goods orders were down in May. We have one lender offering 30 Year fixed rate loans at 4.25% at a cost of one point (but their service is way too slow, so we not quoting that rate); these are definitely the lowest rates quoted since the 1960s.

Factors to consider when a buyer keeps his existing house. If a buyer does NOT have a 30% "Equity Cushion" (the loans exceed 70% of the value of the home), for debt ratio purposes, lenders will hit that buyer for the mortgages on both the new house and the existing house, whether the existing house has a prospective renter or not. This often prevents buyers from qualifying for a new home, as we mentioned yesterday.

Another factor is "buying UP", or "buying DOWN". If a buyer is buying a home that is worth less or that is inferior to his current home, lenders will often deem the new home an "investment property", and demand higher rates and more down payment, even if the buyer promises/swears/guarantees that the new home will be owner occupied.

We have a client with major vision problems who is forced to move out of his Oakland Hills home (that he will sell in a few months) to the flatlands near public transportation b/c he can no longer drive. Even though we can prove the vision problems, two lenders denied the loan, claiming his new purchase was actually an "investment property". We now have the loan approved and in documents, but we were surprised by the other lenders' excessive levels of suspicion.

Jay Voorhees and Heejin Kim at (925) 855-4491.