October 9th, 2008 2:45 PM by Melanie Mitchell - Team Lead/Listing Specialist
Recently I asked Jeff Greige Vice President of Paramount Mortgage to give me the straight scoop on the local Home Mortgage Market.
ST. LOUIS, MO – There has been many stories of gloom and doom in the media concerning the U.S. financial climate over the past few weeks. How does this affect the average St. Louis home buyer? Have mortgage funds dried up?
“The mortgage market is not as bad as the media is portraying it,” remarks Jeff Griege, Vice President at Paramount Mortgage, “so, as the phrase goes, don’t believe the hype!” When you apply a common sense perspective to the situation it is “honestly, no different now than it was 6 months ago,” continues Griege.
There is plenty of money to lend to the mortgage market. – The government takeover of Fannie Mae and Freddie Mac is designed to put downward pressure on mortgage rates and to ensure that home loans remain available. With Freddie and Fannie under control, mortgage funds will not dry up.
Treasury Secretary Henry Paulson says the government has three objectives: "market stability, mortgage availability and taxpayer protection." That's another signal that the government wants mortgages to remain available, at good rates, to borrowers with a low risk of default.
The Paramount Mortgage perspective – Since the bail out of Fannie and Freddie rates have dropped on average .5% to .75%, subject to daily market fluctuations. “What has changed over the last six months is that anyone with a credit score under 720 will get a slightly higher rate. On average, this will consist of an additional .125% increase on a conventional loan,” stated Griege. Additionally, “FHA‘s rate adjustment cut off is a credit score of 620.”
The conventional adjustment is not dramatic considering rates are still at 25-year lows. Anyone with a credit score under 680 will find it better to finance with a FHA-backed loan instead of a conventional loan especially if their down payment is less than 20% of the purchase price. The rate adjustment for credit scores under 680 on a conventional loan could consist of an additional .75% added to the rate. FHA’s maximum loan limit for the St. Louis metro area is $281,250.
According to Griege, “the only areas in the mortgage markets that are suffering are the Jumbo loans (loans above $417,000). Fixed rates are in the high 7’s to low 8’s with at least 20% down.” ARMs (Adjustable Rate Mortgage loans) are good options with rates around the Mid 6’s but, a minimum down payment of 10% is required and preferably 20%. Bottom line – people with reasonable credit purchasing a home under $417,000 can still get financing.