Lending Pendulum is swinging back!

Wanted to share with you a quick look at what is happening on the lender side of the real estate market.   Beverly Barnes with RTC Mortgage put together a nice review.   Good news for the buyers who have held back buying due to being self employed or looking to put down less then 20% down. Take a peek!

Looser Underwriting Guidelines?

It’s taken a while but the pendulum is swinging back to a much more reasonable happy-medium when it comes to underwriting guidelines. We all know that it was practically non-existent underwriting criteria that led to the collapse of the mortgage and financial markets several years ago. Then, the pendulum swung so far the other way that it seemed almost impossible to get approved for a mortgage. Now, things have become more reasonable. Some are even saying it might be too loose again.

Regardless of your opinion, here are some of the more recent changes that are making it easier to qualify for a mortgage. Keep in mind that these changes pertain to “conforming” loans originated by lenders and sold to the Government agencies known as Fannie Mae and Freddie Mac. Therefore, it pertains to almost all loans originated by any lender with loan limits up to $636,150 in the highest priced markets such as Orange and Los Angeles counties and most of the Bay Area counties in California.

Here’s a quick summary of some of the changes:

Less Self-Employment Documentation:

In some instances, self-employed borrowers can now be approved with just 1-year of tax returns instead of 2 years.

Higher Debt-To-Income (DTI) Ratios

Applicants with compensating factors may now receive approvals with a Debt-To-Income ratio up to 50%. Previously, the cutoff was 45%.

Lower Down Payments/Higher Loan-To-Value Ratio’s

There are programs allowing as little as 3% down.

Appraisal Waivers:

In certain refinance transaction, the appraisal can be waived altogether, saving the borrower hundreds of dollars. We will see this apply to Purchase transactions soon too.

Disputed Tradelines:

If a borrower disputed certain information in their credit report, we used to have to get those disputes cleared, adding to the time and effort it took to receive loan approvals. This is no longer the case.

Lower Credit Scores:

Many lenders have lowered their minimum FICO scores for qualifying. The minimum score allowed by Fannie Mae/Freddie Mac remains 620 but lenders often impose their own higher limit. Lower limits may be a result of lender trying to increase their lending volume as the number of refinance and purchase loans have slowed down this year.

Keep in mind that these changes do not pertain to all loans and all lenders. Each lender has the right to create their own stricter guidelines than what The Government Agencies permit. But, these changes do apply to most of the lenders that we work with.

Search Available Homes in Orange County

If you are thinking about buying the first step in the process is to get pre-approved.  It is also important that your Realtor and Lender work together on that pre-approval. Your agent is going to advise your lender several pieces of information needed for taxes, etc.  Don't hesitate to reach out to our team for assistance.

Orange County Home Value Mid-Year Report

The first half of 2017 is behind us and the Orange County real estate market continues to be impacted by low inventory and strong buyer demand, that isn't a bad thing.  Good news for sellers, especially those priced under the $750,000 range.  

This doesn't mean there isn't good news for home buyers, there are opportunities! The trick however is to be approved and ready to buy as homes sell quickly, especially for homes priced at fair-market value.

Below is a quick snapshot from Reports on Housing's Steven Thomas.

• The active listing inventory decreased by 90 homes in the past couple of weeks, and now totals 5,877, a 2% drop. It officially reached a peak a month ago and is now slowly dropping. The inventory never reached 6,000 homes this year. Last year, there were 7,295 homes on the market, 1,418 more than today.
• There are 41% fewer homes on the market below $500,000 today compared to last year at this time and demand is down by 20%. Fewer and fewer homes and condominiums are now priced below $500,000. This price range is slowly disappearing.
• Demand, the number of pending sales over the prior month, increased by 55 homes in the past couple of weeks, and now totals 2,890. The average pending price is $844,699.
• The average list price for all of Orange County remained at $1.6 million. This number is high due to the mix of homes in the luxury ranges that sit on the market and do not move as quickly as the lower end.
• For homes priced below $750,000, the market is HOT with an expected market time of just 39 days. This range represents 39% of the active inventory and 62% of demand.
• For homes priced between $750,000 and $1 million, the expected market time is 56 days, a hot seller’s market (less than 60 days). This range represents 18% of the active inventory and 19% of demand.
• For homes priced between $1 million to $1.25 million, the expected market time is 81, a tepid seller’s market with very little appreciation.
• For luxury homes priced between $1.25 million and $1.5 million, the expected market time increased from 101 days to 110. For homes priced between $1.5 million to $2 million, the expected market time decreased from 135 to 130 days. For luxury homes priced above $2 million, the expected market time decreased from 280 to 278 days.
• The luxury end, all homes above $1.25 million, accounts for 36% of the inventory and only 13% of demand.
• The expected market time for all homes in Orange County dropped in the past couple of weeks from 63 days to 61 days, a tepid seller’s market (60 to 90 days). From here, we can expect the market time to slowly rise as housing transitions into the Autumn Market.

• Distressed homes, both short sales and foreclosures combined, make up only 1.5% of all listings and 2.3% of demand. There are only 31 foreclosures and 57 short sales available to purchase today in all of Orange County, that’s 88 total distressed homes on the active market, identical to two weeks ago. Last year there were 130 total distressed sales, 47% more than today.
• There were 2,766 closed sales in July, a 14% drop over June 2017 and a 1.9% decrease over July 2016. The sales to list price ratio was 98.2% for all of Orange County. Foreclosures accounted for just 0.8% of all closed sales and short sales accounted for 0.8%. That means that 98.4% of all sales were good ol’ fashioned equity sellers.

If you are thinking of a move and not sure where to start, give us a call to review the current market in your neighborhood.  We will put together a strategy that meets your profit goals.

FREE Download - Fall Sellers eGuide

If your a buyer, don't be discouraged, we have successfully helped several buyers this year find their dream home.  The key is to be in-tuned to the market, pre-approved and ready.  Let's grab a cup of coffee, review what you looking for and put a strategy in place to make that happen.  Depending on if you are looking to move up or down size, you are probably in the perfect market to sell and buy before rates increase in 2018!

FREE Download - Fall Home Buyer's eGuide