Dec 12 2007
It’s Getting Harder!
Two announcements this week are going to make it a little harder to get loans done for awhile.
The first is that Denver has been slated as a “declining market”. What does that mean? That means that because property values are on a decline that lenders are not going to lend to their maximum ability, they will require an extra 5% down payment. In other words, if their standard program required 5% down, in certain parts of Denver they will require an additional 5% or 10% total. The hard part of this is they do not give a list of “places”, some parts of Denver are fine and some are not. You will not know for sure until appraisal.
The second new challenge we are facing is that Fannie Mae and Freddie Mac are instituting a “risk based” pricing model. The lower your credit score the more it will “cost” you to get a loan. 680 FICO score and above will be fine, everything below that will incur more cost in getting a loan. Less than 620 will require as much as 2 points in cost. What is the bottom line? At today’s rates you would be at 6.375% with 1 discount point, if you had a sub 620 FICO score it would either be 6.375% with 3 discount points or 7.375% with 1 discount. WOW!
It’s now getting even harder. Freddie Mac has added an additional .25 point fee to all their deals calling in a “market condition” fee. That is above and beyond the fees addressed above.
It started. Today on December 20th we are now using risk based pricing based on credit scores.