Boston Real Estate Blog

Mortgage Market Update 

April 26, 2010

As the first time homebuyer deadline rapidly approaches, I wanted to keep you informed on current interest rates and a few items pointers on Flips and Deposits that may help going forward.  

Mortgage Rates:  Mortgage rates bounced around a tight range for most of last week, as there wasn’t much in the way of news to motivate movement in the first three days of the week. Below is a sample of some of our key rates for a 740 FICO and 80LTV borrower w/ NO points:

Program Updates:    Below is a graph which illustrates how borrowers are financing their new home purchases. “FHA IS THE WAY” has been the motto of many mortgage bankers and brokers since the collapse of the secondary mortgage market in 2007. Notice how FHA market share has grown since then and one might argue many of the first time home buyers who took advantage of the tax credit were able to because of FHA. 

Underwriting Updates:   

Flips - Property Flipping is a process of purchasing existing or proposed construction properties with the intention of reselling the properties for a profit. Individuals that flip properties employ a variety of different approaches to reach their objective - some briefly hold title(months or days) and others assign their interest in a contract to a third party(nominee) without ever taking title. Although these practices are legal, obtaining financing through conventional means can be problematic if:

·         The time the seller has title to the time of the P&S signing is less than 90 days

·         The increase in sales price is greater than 20% from their cost and significant repairs can not be substantiated

Although we may be able to work through some of these issues, it is always best to involve me in the process early if you suspect the property may fall into the definition of a flip.  As usual, Mortgage Insurance guidelines are significantly stricter so please pay special attention to any borrower with any preapproval with less than 20% down. 

Deposits - In most circumstances, deposit funds must be drawn from a homebuyer’s personal account. If your client’s intention is different from that, urge the homebuyer to contact the lender immediately.  You may have cause for concern under the following scenarios: 

• Deposit written on a credit card check
• Friend or relative writes check instead of your client
• Funds wired from an unknown source

Since most banks must now verify source of deposit money, deals could be delayed or even denied under the above deposit situations.

As always, please let me know if you have any questions or need any additional information.

Best, 

Jason Deeb
Senior Loan Officer

Direct:  781.486.7143
Cell:      617.901.8405

Fax:      781.245.7373
Email:   jdeeb@msamortgage.com