Rates are rising, how can you secure the cheapest mortgage for your customer?

Mortgage rates moved higher last week. Freddie Mac reported last Thursday that the 30-year fixed rate mortgage has moved up by 14 basis points to 2.79%. Whether due to the economic recovery, or the likely spending spike we’re going to see from a Democratic president, Congress and Senate, those rates are slowly trickling upwards and making headlines in the process.

Seeing those headlines, customers are calling their loan officers. Driven by a fear of missing out (FOMO) on historically low rates, homeowners who haven’t yet refinanced are trying to get in before the window of opportunity closes. For originators, this could be a serious chance to generate some big volumes early in the year. Originators have an added advantage, too, if they can stay ahead of the information curve.

“The data that that’s actually getting reported, a lot of time, is about a week off,” said Brian Grubbs (pictured), president MLO at the Raleigh Mortgage Group. “It works to our benefit when they’ve heard that rates jumped up when, often by the time they call, rates have leveled back out and we’re able to give a better rate than what the Freddie Mac average is.”

Grubbs explained that news of market-driven rate spikes, as well as moments of political or economic uncertainty, can spark some panic shopping on the part of consumers. While these forces might make rates rise temporarily, he emphasized that dovish policy from the Fed and an explicit commitment to keeping rates low will keep things stable for at least the medium-term. He added that shifts in a few basis points shouldn’t be the sole difference-maker for a customer.

Read more: Guaranteed rate originator takes the extra time to educate

When rising rates hit the headlines, Grubbs doesn’t try to pile on his marketing efforts. Thanks to consistently high volumes, he can let the headlines bring customers to him. His focus, instead, is on delivering a good experience and high-quality service.

Grubbs focuses on educating, explaining, and offering his customers the right deal for their needs. Grubbs said that often his prospects might come to him during rate-anxious times citing a neighbour’s mortgage, secured at a 1.99% rate. It’s up to him to explain that the neighbour secured that rate because they borrowed 50% of their home value on a 10-year fixed, rather than taking cash out on a 30-year term.

“Just let people know what you can do, not what you wish you could do,” Grubbs said when asked how he approaches these FOMO-driven conversations. If he can get a better rate than the Freddie Mac average, it’s a slam dunk. If he can’t, he’s forthright about getting the customer the best deal he can for them.

While customer FOMO is an opportunity for loan officers, Grubbs emphasized that ethics and prudence are needed in these situations. Matching the customer’s anxiety and getting them locked in to something ASAP isn’t the right move to build a sustainable partnership. Rather, it’s up to the loan officer to be the voice of reason, securing that customer exactly what they need, confident they can still get a low rate.

“I think a lot of people want to just lock somebody right up front… they’re so scared that pricing is going to change,” Grubbs said. “But I know that it’s going to be an amazing year, and the Feds are going to do what they need to do to make sure that rates remain low until 2022.  Sure, on Wall Street somebody sneezes and the rates go up, but I know that, you know, soon enough, there’ll be some kind of news that pushes them right back down.”

Source: mpamag.com

Fannie and Freddie boost 2021 forecasts due to vaccine distribution

With vaccinations underway and a larger stimulus package expected with the incoming Biden administration, Fannie Mae and Freddie Mac both improved their 2021 housing forecasts in January.

Fannie Mae projected an annual purchase volume above $1.75 trillion and expects that refinances will reach $2.16 trillion. Both figures are marked increases from its December forecast of $1.66 trillion in purchases and $1.8 trillion in refis. Expectations for total originations in 2021 jumped to about $3.91 trillion from $3.47 trillion the month before, while 2020 should end close to $4.41 trillion — also up from December’s estimated $4.29 trillion. Fannie Mae still predicts the 30-year fixed-rate mortgage to average 2.7% for the year.

“COVID-19 remains the dominant force altering the path of the economy through the behaviors of people, businesses and policy makers,” Doug Duncan, Fannie Mae SVP and chief economist, said in a press release. “Therefore, the best policy for economic recovery is the broad distribution of an effective vaccine, which is underway. The sooner this can be successfully accomplished the sooner growth can accelerate, and our thought is that by midyear vaccine distribution efforts will be well-established, allowing for a strong second half.”

Fannie’s January forecast predicts a slight bump in yearly housing starts to 1.45 million from 1.44 million in December. Any upward momentum will help the historic inventory shortage and drive the purchase numbers. The enterprise raised anticipated home sales to 6.72 million for 2021, up from 6.66 million the month prior. Sales in 2020 are estimated to close at 6.47 million.

“One impact of our projected growth acceleration is likely to be modestly rising interest rates, whether as a result of increased growth expectations — as consumer savings are augmented by stimulus leading to stronger consumer spending — or by a modest increase in inflation driven by demand growth outpacing a recovery in supply,” Duncan continued.

Freddie Mac’s latest quarterly forecast isn’t quite as rosy, but also provided much more optimism compared to 3Q.

Freddie expects 30-year interest rates to average 2.9%, down from 3% one quarter earlier. It projects about $1.55 trillion in purchase volume, $1.75 trillion in refinancing and 6.5 million homes sold. All three numbers jumped from the third quarter’s forecast of $1.45 trillion, $1.24 trillion and 6.1 million, respectively.

“Despite the uncertainties of the pandemic, the housing market performed well in the second half of 2020,” said Sam Khater, Freddie Mac’s Chief Economist. “Low mortgage rates and the ability to work remotely continued to support the demand for housing, which is reflected in home sales reaching levels not seen since 2006. Entering 2021, we anticipate a modest rise in rates that will likely affect refinance originations, which are coming off a remarkable year. We therefore forecast total originations to decline slightly to $3.3 trillion but remain strong this year.”

Source: nationalmortgagenews.com

Mortgage and refinance rates today, Jan. 16, and rate forecast for next week

Today’s mortgage and refinance rates 

Average mortgage rates inched lower yesterday. But that followed six days without a fall, five of which showed rises. And averages remain noticeably higher than they were early in the New Year when they were at or near their all-time low. Still, they remain amazing bargains by any standards.

Unfortunately, there are still no reliable trends in these rates. But there are enough danger signals for me to suggest caution.

So I’d lock my rate as soon as possible, certainly if I were due to close in the next 30 days. Read on for details.

Find and lock a low rate (Jan 18th, 2021)

Program Mortgage Rate APR* Change
Conventional 30 year fixed 2.745% 2.745% Unchanged
Conventional 15 year fixed 2.313% 2.313% -0.05%
Conventional 5 year ARM 3% 2.743% Unchanged
30 year fixed FHA 2.438% 3.415% -0.06%
15 year fixed FHA 2.438% 3.38% Unchanged
5 year ARM FHA 2.5% 3.232% Unchanged
30 year fixed VA 2.308% 2.479% -0.01%
15 year fixed VA 2.25% 2.571% Unchanged
5 year ARM VA 2.5% 2.413% Unchanged
Rates are provided by our partner network, and may not reflect the market. Your rate might be different. Click here for a personalized rate quote. See our rate assumptions here.

Find and lock a low rate (Jan 18th, 2021)

COVID-19 mortgage updates: Mortgage lenders are changing rates and rules due to COVID-19. To see the latest on how coronavirus could impact your home loan, click here.

Should you lock a mortgage rate today?

Probably. But that’s what I said last week. And mortgage rates have fallen — though only a little — since then.

Personally, with rates in their current state of flux, my instinct is to be cautious. That’s why I’d lock as soon as possible.

But it’s perfectly possible that those rates will fall further, perhaps even setting a new all-time low. And, if you’re feeling brave, nobody could blame you for playing wait-and-see. Just be aware of the stakes you’re gambling with.

But, whatever your inclination, read the next section before making your choice. At least you’ll be making your decision based on some information. And, in the meantime, my personal recommendations are:

  • LOCK if closing in 7 days
  • LOCK if closing in 15 days
  • LOCK if closing in 30 days
  • FLOAT if closing in 45 days
  • FLOAT if closing in 60 days

However, with so much uncertainty at the moment, your instincts could easily turn out to be as good as mine — or better. So be guided by your gut and your personal tolerance for risk.

What’s moving current mortgage rates

I’ve been writing a lot over the last week or so about the two conflicting forces currently acting on mortgage rates. On one side is the economic damage wreaked by the pandemic, which is trying to drag rates lower. On the other is the prospect of much higher government spending and borrowing, which acts to push them upward.

Government borrowing

On Tuesday, the US Treasury auctioned 10-year bonds worth $38 billion. And there was surprisingly strong demand for those. Indeed, it was this auction that stemmed rising bond yields and mortgage rates (those rates usually shadow those yields).

But one auction’s outcome is a poor predictor of the next’s. And you’d be brave to the point of foolhardiness to assume that’s the end of the upward pressure.

Thursday saw President-elect Joe Biden unveil a $1.9 trillion pandemic stimulus (or relief) plan. However, his party lacks the 60 Senate seats needed to push the enabling legislation through.

But many expect $1+ trillion in new borrowing. And it’s likely more will follow to fund infrastructure and other spending plans.

So high demand for government borrowing is very likely eventually to lead to higher yields on Treasury bonds. And that should act to push up mortgage rates.


Meanwhile, the pandemic continues to rage at alarming levels. According to The New York Times, “At least 3,744 new coronavirus deaths and 240,925 new cases were reported in the United States on Jan. 15.”

Naturally, that’s having a severe economic impact. In an understated way, Comerica Bank Chief Economist Robert A. Dye, Ph.D. yesterday suggested:

U.S. economic data from December and early January remained consistent with much cooler growth in overall economic activity compared with the historic rebound in third quarter GDP.

Comerica Economic Weekly newsletter, Jan. 15, 2021

But that “cooler growth” could turn out to be negative growth this quarter, and there’s a real possibility of a double-dip recession. Yesterday’s retail sales figures showed falls for the third consecutive month. And the most recent monthly and weekly employment data have been dire.

Yes, the vaccination drive will help. But that’s got off to a slow start. And we’re probably looking at several months before there’s any prospect of a return to near-normal economic activity. All the while, this will be a drag, keeping mortgage rates lower than otherwise.

So will government borrowing push mortgage rates higher? Or will the pandemic’s economic effects drag them downward? That’s what nobody currently knows.

Economic reports next week

Next Monday is Martin Luther King Jr. Day. And markets will be closed so we won’t be publishing our daily update on mortgage rates. But we’ll be back on Tuesday.

Next week is a relatively quiet one for economic reports:

  • Thursday — Weekly new claims for unemployment insurance. And December housing starts and housing permits
  • Friday — December existing home sales

It would be surprising if any of those (except, perhaps, the jobless figures) were to have much effect on markets.

Find and lock a low rate (Jan 18th, 2021)

Mortgage interest rates forecast for next week

Nothing’s changed. And mortgage rate movements remain inherently unpredictable. They really could go either way, though probably not very far.

Mortgage and refinance rates usually move in tandem. But note that refinance rates are currently a little higher than those for purchase mortgages. That gap’s likely to remain constant as they change.

How your mortgage interest rate is determined

Mortgage and refinance rates are generally determined by prices in a secondary market (similar to the stock or bond markets) where mortgage-backed securities are traded.

And that’s highly dependent on the economy. So mortgage rates tend to be high when things are going well and low when the economy’s in trouble.

Your part

But you play a big part in determining your own mortgage rate in five ways. You can affect it significantly by:

  1. Shopping around for your best mortgage rate — They vary widely from lender to lender
  2. Boosting your credit score — Even a small bump can make a big difference to your rate and payments
  3. Saving the biggest down payment you can — Lenders like you to have real skin in this game
  4. Keeping your other borrowing modest — The lower your other monthly commitments, the bigger the mortgage you can afford
  5. Choosing your mortgage carefully — Are you better off with a conventional, FHA, VA, USDA, jumbo or another loan?

Time spent getting these ducks in a row can see you winning lower rates.

Remember, it’s not just a mortgage rate

Be sure to count all your forthcoming homeownership costs when you’re working out how big a mortgage you can afford. So focus on your “PITI” That’s your Principal (pays down the amount you borrowed), Interest (the price of borrowing), (property) Taxes, and (homeowners) Insurance. Our mortgage calculator can help with these.

Depending on your type of mortgage and the size of your down payment, you may have to pay mortgage insurance, too. And that can easily run into three figures every month.

But there are other potential costs. So you’ll have to pay homeowners association dues if you choose to live somewhere with an HOA. And, wherever you live, you should expect repairs and maintenance costs. There’s no landlord to call when things go wrong!

Finally, you’ll find it hard to forget closing costs. You can see those reflected in the annual percentage rate (APR) you’ll be quoted. Because that effectively spreads them out over your loan’s term, making that higher than your straight mortgage rate.

But you may be able to get help with those closing costs and your down payment, especially if you’re a first-time buyer. Read:

Down payment assistance programs in every state for 2020

Mortgage rate methodology

The Mortgage Reports receives rates based on selected criteria from multiple lending partners each day. We arrive at an average rate and APR for each loan type to display in our chart. Because we average an array of rates, it gives you a better idea of what you might find in the marketplace. Furthermore, we average rates for the same loan types. For example, FHA fixed with FHA fixed. The end result is a good snapshot of daily rates and how they change over time.

Source: themortgagereports.com

2021 Conforming loan limits range from $548K to over $1 million

Conforming loan limits increase to $548,250 for most areas

Conforming loan limits are on the rise.

Home buyers in most of the U.S. can now get a conforming loan up to $548,250 with just 3% down.

And the single-family loan limit is over $822,000 in high-cost areas.

Multifamily home buyers get a nice increase in
buying power, too, with limits for 2-4-unit properties topping $1 million in
some areas.

On top of this, we’re seeing ultra-low interest rates carry over from 2020 into 2021.

Put all it together, and you get incredible
purchase and refinance opportunities for home buyers and homeowners alike.

Check today’s conforming mortgage rates (Jan 17th, 2021)

In this article (Skip to…)

Freddie Mac and
Fannie Mae loan limits for 2021

Lending limits for conventional loans got a nice boost this year.

The Federal Housing Finance Agency (FHFA) determined home prices are up 7.42% on average across the nation.

It raised
conforming loan limits by the same percentage — a dollar increase of almost
$38,000 for the standard one-unit home. Multi-unit
properties got a similar boost.

Baseline conforming loan limits

Standard loan limits for 2021, which apply in most of the United States, are as follows:

  • 1-unit homes: $548,250
  • 2-unit homes: $702,000
  • 3-unit homes: $848,500
  • 4-unit homes: $1,054,500

in mind that these are only “standard” limits. In areas with high-cost real estate, buyers get significantly higher mortgage limits.

Maximum conforming loan limits

conforming loan limits vary by county. They can fall within the following

  • 1-unit homes: $548,250­–$822,375
  • 2-unit homes: $702,000–$1,053,000
  • 3-unit homes: $848,500–$1,272,750
  • 4-unit homes: $1,054,500–$1,581,750

such as Alameda County, California, Arlington, Virginia, and Jackson, Wyoming enjoy the maximum conforming loan limits, while cities like Seattle, Washington and
Baltimore, Maryland fall between the “floor” and the “ceiling.”

Alaska, Hawaii, Guam, and the U.S. Virgin Islands — which follow their own loan
limit rules — the baseline loan limit for 2021 is $822,375 for a one-unit

Verify your home buying eligibility (Jan 17th, 2021)

loan limits by county for 2021

What is a
mortgage loan limit?

A loan
limit is the maximum amount you can borrow
under certain mortgage programs.

is not just one loan limit, but many. Conventional mortgages adhere to one set
of loan limits, and FHA another.
VA loans did away with limits altogether in 2020.

In the world of conforming loans, Fannie Mae and Freddie
Mac limit “borrowable” amounts to keep their nationwide programs available to
those who need them.

For instance, Fannie Mae doesn’t want a $10 million loan
going through its system. That’s a lot of risk wrapped up in one
transaction, and the agency would rather issue many smaller loans to more home

loan limits are on the rise in 2021 to reflect rising
home prices across the country.

is a conforming loan?

A conforming loan is any mortgage that:

  1. Has a loan amount within local conforming loan limits
  2. Meets lending guidelines set by Fannie Mae and Freddie Mac

Mortgages within conforming loan limits are eligible to be backed by Fannie Mae and Freddie Mac, as long as the borrower meets basic criteria for credit score, income, down payment, and debt levels.

Conforming loans typically require:

  • A credit score of at least 620
  • A debt-to-income ratio below 43%
  • A down payment of at least 3%
  • Two-year history of stable employment and income

Exact conforming loan requirements
can vary by lender, but they all have to meet the minimum guidelines set by
Fannie and Freddie.

standards give lenders and investors more
confidence in these loans.

As a result, conforming loans are available with ultra-low mortgage rates and just 3% down payment.

Check today’s conforming mortgage rates (Jan 17th, 2021)

What if my
loan is over the conforming limit?

that the conforming loan limit applies to the loan amount, not the home price.

instance, say a buyer is purchasing a 1-unit home in Boulder, Colorado where
the limit is $654,350. The home price is $1 million, and the buyer is
putting $450,000 down.

buyer is eligible for a conforming loan. The final loan amount is
$550,000 — well within limits for the area.

many applicants will need financing above their local loan limit. For
them, a number of solutions exist.

Jumbo loans

simplest method is to use a jumbo loan. Jumbo mortgages describe any home loan
above local conforming limits.

the example above, let’s say the Boulder, CO home buyer puts down $200,000 on a
$1 million home. In this case, their loan amount would be $800,000 — far above
the local conforming loan limit of $654,350. This buyer would need to finance
their home purchase with a jumbo loan.

You might think jumbo mortgages would have higher interest rates, but that’s not always the case.

Jumbo loan rates are often near or even below conventional mortgage rates.

catch? It’s harder to qualify for jumbo financing. You’ll likely need a credit
score above 700 and a down payment of at least 10-20%.

you put down less than 20% on a jumbo home purchase, you’ll also have to pay
for private mortgage insurance (PMI). This would increase your monthly payments
and overall loan cost.

next method helps you avoid PMI when buying above conforming loan limits.

Verify your jumbo loan eligibility (Jan 17th, 2021)

Piggyback financing for high-priced homes

Perhaps the most cost-effective method is to choose a piggyback loan. The piggyback or “80/10/10” loan is a type of financing in which a first and second mortgage are opened at the same time.

Typically, this structure is used to avoid private mortgage insurance.

A buyer can get an 80 percent first mortgage, 10 percent second mortgage (typically a home equity line of credit), and put 10 percent down.

these loans are also available for those putting 20 percent down or more. Here’s how
it would work.

  • Home price: $700,000
  • Down payment: $140,000 (20%)
  • Financing needed: $560,000
  • Local conforming limit: $548,250

buyer could structure his or her loan as follows.

  • Down payment: $140,000
  • 1st mortgage: $548,000
  • 2nd mortgage: $12,000

home is purchased with a conforming loan and a small second mortgage. The first
mortgage may come with better terms than a jumbo loan, and the second mortgage
offers a great rate, too.

Verify your piggyback loan eligibility (Jan 17th, 2021)

What’s the jumbo loan limit for 2021?

Technically there’s no jumbo loan limit for 2021.

Since jumbo mortgages are above the conforming loan limit,
they’re considered “non-conforming” and are not eligible for lenders to assign
to Fannie Mae or Freddie Mac upon closing.

That means the lenders offering jumbo loans are free to set
their own criteria, including loan limits.

For example, one lender might set its jumbo loan limit at $2
million, while another might set no limit at all and be willing to finance
homes worth tens of millions.

But the amount you can borrow via a jumbo or
non-conforming loan is limited by your finances.

You need enough income to make the monthly mortgage payments on your new home. And your debt-to-income ratio (including your future mortgage payment) can’t exceed the lender’s maximum.

You can use a mortgagecalculator to estimate the maximum home price you can likely afford. Or contact a mortgage lender to get a more accurate number.

What if I’m
getting an FHA loan?

FHA loans come with their own loan limits. Standard FHA limits for 2021 are as listed below.

  • 1-unit homes: $356,362
  • 2-unit homes: $456,275
  • 3-unit homes: $551,500
  • 4-unit homes: $685,400

might notice that FHA’s limits are considerably lower than conforming limits.
That’s by design.

The FHA program, backed by the Federal Housing Administration, is meant for home buyers with moderate incomes and credit scores.

the FHA also suits home buyers in expensive counties. Single-family FHA loan limits reach $822,375
in high-cost areas within the continental U.S. and a
surprising $1,233,550 for a 1-unit home in Alaska, Hawaii, Guam, or the Virgin Islands.

What are
today’s mortgage rates for these loan limits?

rates for conforming loans are stellar, which is why so many buyers consider a
conforming loan before using jumbo financing.

a rate quote for your standard or extended-limit conforming loan. Compare to
jumbo rates and piggyback mortgage rates to make sure you’re getting the best

Verify your new rate (Jan 17th, 2021)

Source: themortgagereports.com

MBS Day Ahead: Waiting On Stimulus Details, Shrugging Off Early Reports of $2 Trillion

MBS Day Ahead: Waiting On Stimulus Details, Shrugging Off Early Reports of $2 Trillion

A few hours after markets closed yesterday, news began coming out regarding a Biden aide mentioning tonight’s stimulus proposal would be in the $2 trillion neighborhood.  That’s quite a bit more than the $1.3 trillion that had been making the rounds a few hours prior (the same number was thrown around more than a month ago as well).  Treasuries reacted to this overnight with a whopping sell-off of 3bps.  This reflects the fact that markets have largely priced in some sort of $1.3+ trillion in additional spending/relief.  We won’t get a chance to any additional reaction until tomorrow’s trading session, as Biden won’t be speaking until after 7pm ET.

It’s another light day in terms of economic data, with Jobless Claims already out at 965k vs 795k forecast and 784k previously.  Yes, this is the wrong direction for an economy that’s supposed to be healing from Covid.  It’s hard to sort out the caveats.  On the one hand, we might conclude that states with stringent lockdowns are having an outsized impact, but several states WITHOUT stringent lockdowns saw significant spikes in claims.  On the other hand, we could focus on seasonal adjustments and the fact that past trends in seasonal hiring won’t necessarily line up with the patterns seen during the pandemic. 

Any way you slice it, it looks like Jobless Claims bottomed out at the end of October and have been rising unevenly since then.

20210114 open2.png

Bonus chart for today: mortgage rates vs 10yr Treasury yields

20210114 open.png

MBS Pricing Snapshot

Pricing shown below is delayed, please note the timestamp at the bottom. Real time pricing is available via MBS Live.


UMBS 2.0

102-29 : -0-02


10 YR

1.1040 : +0.0160

Pricing as of 1/14/21 9:46AMEST

Tomorrow’s Economic Calendar

Time Event Period Forecast Prior
Thursday, Jan 14
8:30 Import prices mm (%) Dec 0.7 0.1
8:30 Export prices mm (%) Dec 0.4 0.6
8:30 Jobless Claims (k) w/e 795 787

Source: mortgagenewsdaily.com

The Lenders Giving Borrowers Second Chance Loans

December 15, 2020 &• min read by Gerri Detweiler Comments 8 Comments

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Advertiser Disclosure


Brenda Woods didn’t want to move and leave the garden she had tended for 40 years. But the roof was falling in. And her bank wouldn’t give her and her husband Larry a loan to buy a replacement home.

Brenda’s still tending her garden, though, thanks to a second-chance loan from the New Hampshire Community Loan Fund-a Community Development Financial Institution (CDFI). It let the Woods replace their home with a new, safe, affordable, energy-efficient manufactured home.

Brenda and Larry WoodsNearly 700 families financed homes through the Community Loan Fund, which won a $5.5 million award from the Wells Fargo NEXT Awards for Opportunity Finance. The award was for expansion of an innovative financing program for manufactured housing mortgage loans. The NEXT Awards recognize innovative CDFIs that responsibly serve low-income and low-wealth people and communities.

Community Development Financial Institutions, which include banks, credit unions, loan and venture funds, are making second-chance loans where others may fear to tread. “We are looking for those loan opportunities that are most likely to play a transformational role in someone’s life, especially someone low income and low wealth,” says Mark Pinsky President and CEO of Opportunity Finance Network, a national network of CDFIs.

How CDFIs Help Borrowers

Credit leniency. While borrowers should expect a credit check, a poor credit score shouldn’t stop a borrower from exploring this option. “Virtually all the folks we see have low credit scores. Sometimes it’s a foreclosure, increasingly often it’s due to large medical bills,” Pinsky notes. And unlike traditional loans, consumers with poor or slim credit histories may find that their creditworthiness gets judged in part by how they have handled utility bills or rent – transactions that usually don’t appear on credit reports.

Flexible loan amounts. Ask your bank for a $2,000 loan and the teller may hand you a credit card application, but personal loans through CDFIs often range from $2,000 to $20,000, though the loan amount “can go as low as $500,” Pinsky says. Small loans like these are typically not attractive to larger financial institutions, who may not find them profitable enough.

Willingness to take a risk. All of the institutions that make these loans serve low-income consumers and communities, and as a result may be able to extend credit to those who don’t meet the minimum income requirements of other lenders or those who traditional financing institutions consider “risky.”

Support beyond the loan. Those who get these loans find they often also get a good deal of support and borrower education (called “technical assistance”) to make sure they understand the terms of their loans and can hopefully pay them back successfully. “We might pull their credit report and show them how they can improve their credit score,” Pinsky explains.

Better loan terms. The interest rates and terms for these loans may be better than what the same borrowers may receive if they were to use expensive payday lenders or traditional lenders that finance borrowers with bad credit. Loan repayment terms may be more flexible as well.

CDFIs are often also used to fund personal, auto, housing and/or small business loans. The Opportunity Finance Network (OFN) maintains a directory of CDFIs at OFN.net. The approach appears to be working for those who get the loans and those who make them.

OFN reports that members have extended more than $30 billion in financing, with cumulative net charge-off rates of less than 1.7%.

As for the Woods family, they are thrilled with their CDFI loan. “It was very easy; a smooth process,” says Larry. “These things do take time, but it was reasonable.” They even had an extra reason to celebrate. Their loan was approved on Brenda’s birthday.

Other Second Chance Loans for Bad Credit Borrowers

One of the biggest things a lender considers before approving a loan is the amount of credit risk that comes with the borrower. Second chance loans, on the other hand, are offering second chance financing to those with less-than-perfect credit so they can achieve the financial goals they are trying to reach.

Second Chance Installment Loans

When you are offered a second chance loan, it’s important to make sure that you make each payment on time over the course of the loan. Following the repayment plan can help build a positive credit history which accounts for 35% of your credit score. Making on-time payments can significantly improve your credit and give your credit score a nice boost.

You pay back installment loans through monthly payments. Many of these loans will range from terms of between a few months to up to several years. The following subprime lenders offer these second chance installment loans for up to $35,000 for qualified borrowers.


If you need a loan between $500 and $35,000, then personaloans.com may be able to help. It accepts all types of credit and loans are available nationwide. You can use the loan for any purpose, such as for a car loan, and you get a quick loan decision. The interest rates for this type of loan range between 5.9% and 35.99%, which isn’t surprising for a bad credit loan. The loan term is typically between three and 72 months.

Personal Loans from Credit.com

You can apply for a variety of personal loans on Credit.com also. Loans are avalbile for all credit scores and offer terms up to 36 months and APRs starting as low as 22.74%.


Badcreditloans.com offers loan amounts that don’t exceed $5,000. But it’s willing to help those with subprime and high-risk credit. It offers quick funding, and you can receive your money the business day after your loan is approved. The interest rate for this type of loan varies and can fall between 5.99% and 35.99%. Loan terms are typically between 3 and 60 months.

Short-Term Loans

If you need a short-term loan that you pay off sooner than installment loans, there are lenders who can help in this situation as well. Borrowers usually opt for a short-term loan when they need a smaller amount of cash and fast. These loans don’t go beyond a week to six months and are usually available for an amount between $100 and $2,500.


For a smaller short-term loan, cashadvance.com welcomes people with bad credit and offers the borrower $100 to $1,000. It does require that the borrower have a monthly income of at least $1,000 per month and that they have been employed at their current job for at least 90 days. Cashadvance.com offers much higher interest rates and varied loan terms.


For short term loans up to $2,500, MoneyMutual provides an online marketplace of lenders that can provide funds to qualified borrowers in as little as 24 hours. Their online form is easy and straightforward and takes a few minutes to complete. Their interest rates and loan terms vary depending on the qualifications of the borrower and the amount of the loan.

Borrow with Caution

If you need cash fast but have poor credit, there are still options available to you.

However, borrow with caution. Some of the options for those with poor credit, come at the cost of higher interest rates, which can result in a much higher cost for the life of the loan. And if you can’t commit to the repayment plan and higher costs offer by subprime lenders, you put your personal finances and your credit score at risk.

Image: top, VStock; bottom, courtesy of the Woods

This article was last published June 10, 2013, and has since been updated by another author.

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Source: credit.com

SoFi announces $8.65 billion IPO plan with SPAC Social Capital Hedosophia

Online lender Social Finance (SoFi) has announced plans to go public through an $8.65 billion merger deal with Social Capital Hedosophia (SCH), a special purpose acquisition company (SPAC) headed by venture capital investor Chamath Palihapitiya.

The transaction values SoFi at approximately $6 billion and is expected to provide up to $2.4 billion in cash proceeds. Existing SoFi shareholders will roll 100% of their equity into the combined company, according to its Press release.

The San Francisco-based start-up’s goal is to create a “one-stop financial platform,” and SoFi Chief Executive Anthony Noto told Reuters that their diversified products could help them “navigate both a high interest and low-interest environment.” Noto also said that the company has seen rapid growth in its mortgage refinancing business and investment products in the past year.

Read more: Could 2021 be the year of consolidation in mortgage lending?

Once the deal is closed, SoFi will use the proceeds to further expand its business and pay back debt from its $1.2 billion acquisition of payment software Galileo.

The merger has already received unanimous approval from SCH board of directors and the independent directors of SoFi’s board of directors. It is expected to close in the first quarter of 2021.

“SoFi’s innovative, member-first platform has demystified financial services for millions of Americans and simplified the process for those looking to apply for loans, invest their money, obtain insurance and refinance their debt, among many other tasks that were previously arcane and needlessly complicated,” SCH founder and CEO Chamath Palihapitiya said. “Additionally, the acceleration of cross-buying by existing SoFi members has created a virtuous cycle of compounding growth, diversified revenue and high profitability. We look forward to partnering with Anthony and his team as they help even more members to achieve financial independence.”

Source: mpamag.com

New York exodus gives Westchester most home sales in 24 years

The pandemic-fueled exodus from New York City propelled nearby Westchester County to its strongest year for home sales in more than two decades.

In 2020, completed purchases in the northern suburbs totaled 6,635, the highest tally in records dating back to 1996, according to a report by brokerage Houlihan Lawrence.

It was an abrupt reversal for a county that for years contended with slackening demand due to its highest-in-the-nation property taxes and an oversupply of older, sprawling homes far from train lines. The COVID-19 pandemic pushed those concerns aside as city-dwellers — armed with record-low mortgage rates — fled urban areas in search of more space for work, learning and recreation.

“Everything’s selling,” said Debbie Doern, senior vice president of sales at Houlihan Lawrence. “It’s not easy to get a house right now.”

The median price of single-family homes that changed hands in the fourth quarter jumped 20% from a year earlier to $738,250, appraiser Miller Samuel Inc. and brokerage Douglas Elliman Real Estate said in a report Thursday. It was the biggest annual jump since the end of 2002.

Properties moved quickly once they reached the market, depleting the supply of listings. The county’s single-family sales inventory at the end of December was down 29% from a year earlier to 1,299 homes, the fewest in records dating to 1994, Miller Samuel and Douglas Elliman said.

At the current rate of sales, it would take just 2.6 months to clear all those properties, the fastest pace on record.

“Buyers are poised and ready,” said Scott Durkin, president of Douglas Elliman. “They’ve got financing in hand, deposits in hand, they’re more forgiving of home inspections, and they’re ready to pounce.”

The rollout of COVID vaccines so far isn’t quelling demand. There were 1,459 pending home sales in Westchester as of Dec. 31, Houlihan Lawrence said. That’s 46% more than at the end of 2019.

Source: nationalmortgagenews.com

Debt-to-income ratio, taxes, and insurance: How your DTI is calculated

Does DTI include taxes and insurance?

Your debt-to-income ratio, or ‘DTI,’ is one of the key figures lenders use to decide how much house you can afford.

DTI measures your monthly income against your ongoing debts, including your mortgage, to figure out how large of a payment you can afford on your budget.

Since property taxes and homeowners insurance are included in your mortgage payment, they’re counted on your debt-to-income ratio, too. That means tax and insurance rates will impact your loan amount.

Here’s how to calculate DTI with taxes and insurance and figure our what you can really afford.

Verify your home buying budget (Jan 17th, 2021)

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How is DTI calculated?

Lenders want to be sure you can repay your mortgage debt. So they look closely at several financial details, including your debt-to-income (DTI) ratio.

DTI is calculated by adding up your monthly debt payments and dividing them by your gross (pre-tax) monthly income.

Debts that count toward your DTI include things like:

  • Home loan payments (including principal, interest, taxes, and insurance)
  • Credit card debt
  • Student loans
  • Auto loans
  • Personal loans
  • Child support
  • Alimony
  • Any other monthly payment for debt, even if it is not listed on your credit report

This shows what percentage of your income is taken up by existing debts, and how large of a mortgage payment you could reasonably afford on top of your current obligations.

Note that non-debt payments like gas, electric, and cell phone bills are not counted toward DTI.

Verify your home buying budget (Jan 17th, 2021)

How taxes and insurance affect your DTI

“Property taxes and homeowners insurance are definitely part of the debt-to-income ratio calculation,” says Denise Panza, a senior mortgage banker with Total Mortgage. “As a matter of fact, they are a huge piece of the equation.”

Taxes and insurance are typically paid along with your mortgage principal and interest. As such, lenders will add the monthly cost of taxes and insurance onto your mortgage payment to determine what you can afford.

If you plan to purchase a home, you should consider how much your property taxes and homeowners insurance will cost and how both will factor into your overall homebuying budget, recommends says Britny Lawhorn, a mortgage expert and assistant publisher with Finder

Since the cost of property taxes and insurance vary from one homeowner to the next, some buyers will be impacted more than others.

“Also, consider whether you expect these costs to go up along with the costs to improve, repair and maintain your home,” she adds.

Property tax rates

Taxes on real estate can vary widely based on your state and county.

“The difference between, say, a 1 percent and 1.5 percent tax rate is huge,” says Tom Trott, branch manager for Embrace Home Loans.

“For example, if the assessed value of your home is $300,000, your property taxes would be $3,000 or $4,500, respectively, based on a 1 percent or 1.5 percent tax rate. The monthly escrow you would pay toward those taxes would range from $250 to $375.”

Trott explains, “If you earn $5,000 monthly in income, you would experience a 2.5 percent increase in your DTI ratio based on this tax rate alone.”

Two kinds of insurance

When talking about taxes and ‘insurance,’ understand there are two different kinds of insurance counted toward your DTI.

“First, there’s your homeowners insurance, which covers you in the event there is a loss to your property, such as with fire, theft, injury or other damage to your home,” says Trott.

The second type is mortgage insurance.

“Mortgage insurance covers the financial institution that owns your loan. If you went into default, the mortgage insurance pays your lender for any loss as a result of the default,” Trott says.

Mortgage insurance is typically required if you put down less than 20% on a home loan. It usually takes the form of private mortgage insurance (PMI) on a conventional loan or mortgage insurance premium (MIP) on an FHA loan.

The amount you pay will depend on your loan type, down payment, and credit score.

DTI calculation example

Let’s say your gross monthly income (the amount you make before taxes and other deductions are taken out) is $7,000.

Assume your monthly debt payments total $2,500:

  • $1,500 — Estimated monthly mortgage payments ($1,150 for loan principal and interest, plus $50 for homeowners insurance and $300 for property taxes)
  • $300 — Monthly car payments
  • $300 — Monthly student loan payment
  • $400 — Credit card minimum payments and other monthly debt obligations

Mortgage payment with principal and interest estimated using The Mortgage Reports mortgage calculator. Your own monthly payment will vary based on your interest rate, location, and more.

To get your DTI you would divide $2,500 by $7,000, which would yield a ratio of approximately 36%.

That’s well within the amount most lenders will approve; some even allow debt-to-income ratios as high as 45% or 50%.

Note that in this example, the monthly mortgage payment includes property taxes and homeowners insurance premiums. HOA dues would typically also be included if the property is part of a homeowners association.

If you make a down payment of less than 20%, you’ll likely also have to pay for private mortgage insurance (PMI) which would be included in your DTI as well.

Other monthly housing expenses, like utilities, are not included.

The higher your property taxes, homeowners insurance, and mortgage insurance premiums, the less room you’ll have left in your budget for principal and interest payments.

That means taxes and insurance can have a significant impact on the loan amount a mortgage lender will approve you for.

Verify your home buying budget (Jan 17th, 2021)

Front-end vs. back-end DTI

Lenders often calculate two separate debt-to-income ratios: front-end DTI and back-end DTI.

“The front-end ratio is only comprised of your housing-related debt,” says Trott. “This includes your monthly mortgage-based payment of principal and interest, property taxes, monthly mortgage insurance if applicable, homeowners insurance, and homeowners or condominium association dues if applicable.”

Trott explains that if property taxes and homeowners insurance are totaled as a yearly amount, that sum is divided by 12 to estimate the average monthly amount that would go toward the front-end ratio.

The back-end ratio, on the other hand, includes housing expenses plus monthly payments on all other outstanding debt, according to Panza.

“These other outstanding debts can include credit cards, student loans, car loans, alimony payments, child support, and installment debts,” she says.

What DTI ratio do lenders want to see?

Lenders prefer a DTI ratio that’s within an acceptable range or below a particular threshold.

“Lenders often prefer a DTI of 43 percent or lower for conventional loans or FHA loans, and 41 percent for USDA and VA loans,” says Lawhorn.

“Some loan programs allow borrowers to exceed these limits if they meet certain qualifying criteria.”

In his experience, Trott has observed lenders being flexible with some of these limits.

“Fannie Mae and Freddie Mac back-end ratios often need to be less than 50 percent or even lower if your credit score is not as strong. FHA and VA loans can often go as high as 55 percent, depending on compensating factors such as credit, discretionary income, and liquid assets,” he says. “USDA loans usually require a 29 percent maximum on the front-end ratio and 43 percent on the back-end ratio.”

New DTI rules offer more flexibility

Note that a new qualified mortgage (QM) rule has resulted in lenders being more flexible about debt requirements.

“Previously, lenders were required to strictly stick to the 43 percent DTI limit,” says Lawhorn.

“But under the new QM rule, while lenders must still assess a borrower’s DTI they can take into consideration the types of debts the borrower has. And they can consider expected future income rather than sticking to a numerical calculation.”

How does DTI affect your mortgage?

As mentioned, your DTI ratio will impact your ability to qualify for different kinds of loans–including conventional, FHA, VA, and USDA loans.

But DTI isn’t the only criteria lenders look closely at.

“Credit scores are also important, as many programs have minimum credit score requirements. The amount you can put toward your down payment is also important,” says Trott.

To improve your odds of getting approved and being offered the best interest rates on mortgage loans, prepared to do a little homework.

“Work to boost your credit score. A score of 720 and above will get you a better rate,” Lawhorn suggests.

“Also, try to save up as much as you can so that you can afford a higher down payment. And avoid any large purchases, such as a new car, before applying for a mortgage loan.”

Taking out big debts or opening a new line of credit before you apply for a home loan can affect your credit score as well as your DTI, and might seriously reduce the amount you can borrow.

Find your home buying budget

You can estimate your home buying budget using today’s mortgage rates and a mortgage calculator.

Or, if you’re ready to start house hunting, you can get pre-approved by a mortgage lender. This will give you a verified budget and the clout you need to make a competitive offer on a home.

Ready to see how much home you can afford?

Verify your new rate (Jan 17th, 2021)

Source: themortgagereports.com

Improvements in Forbearance Continue to Slow

A decline in the number of forborne
loans in those portfolios serviced for banks and private label securities (PLS)
accounted for most of the modest downturn in overall numbers last week. Black
Knight said the number of active plans dropped by 9,000 loans or 0.3 percent compared
to the previous week. The the total of active plans is only 1.5 percent below
where it was in December, continuing a recent trend of slowing improvement. “This
further sets the stage for a great many plans to still be active when the first
wave of forbearance plans begin to expire at the end of March, the Black Knight
report says.”

serviced for bank portfolios and private label securities (PLS) declined by
13,000 loans. This was partially offset by a 4,000-loan rise in FHA and VA
loans. The number of forbearances in Fannie Mae and Freddie Mac’s portfolios
held steady week-over-week.

number of new forbearance plans rose, rose by 10,000 from the previous week but
were lower than the weekly average of 32,000 seen before the holidays. Many of
these loans were restarts
.  Approximately
370,000 active plans are slated to be reviewed for extension/removal by the end
of January.

of January 12, Black Knight estimates that 2.63 million or 5.1 percent of the
53 million active mortgages nationwide are in forbearance plans. Those loans
represent $545 billion in unpaid principal. About 15 percent of homeowners in
plans are current on their mortgage payments and 83 percent of the plans have
been extended
at some point since the program started in March.

are now 932,000 GSE loans in forbearance, 3.3 percent of their combined 28
million loan portfolio. FHA and VA plans total 1.135 million or 9.4 percent,
while bank/PLS forbearances account for 5.1 percent of those loans or 660,000

to investors and for payment of taxes and insurance have dropped significantly
since mid-May when the total monthly commitment of principal and interest was estimated
at $8.5 billion and $2.8 billion for payments out of escrow. The monthly aggregate
is now $3.3 billion, almost evenly distributed across the three investor
categories. Required payments of insurance and tax bills on forborne loans are
now estimated at $1.2 billion, $0.4 billion for each loan type.

Source: mortgagenewsdaily.com