After a long march upward, the US stock market has been taking a beating in the last week or so. The Dow Jones Industrial Average is down nearly 800 points for its high point at the end of December. The other indexes are seeing similar sell offs over the last ten days.
While the stock sell-off is not great news for the portfolios of investors, it has been good news for mortgage interest rates. As investors pull money out of stocks they tend to invest money in other places like mortgage backed securities and bonds. That inflow of money leads to lower mortgage interest rates. And as expected, mortgage interest rates have been drifting lower in the last week.
Odds are that mortgage interest rates will move significantly higher over the course of 2014, but there will be dips along the way. We are entering one of those dips right now so if you have considered looking in to refinancing your mortgage or buying a home, contact us right away. There is no telling how long this dip in rates will last or if we will see a dip in rates like this again.
As we enter 2014 we also enter a new phase of mortgage regulations. Several new rules designed to prevent another housing bubble from emerging are set to take effect this week. For borrowers, the new rules will mostly mean that it will be a little harder to qualify for large loan amounts. The most substantial change for borrowers is a tightening of debt-to-income ratio limits on conventional (Fannie and Freddie) mortgages. There is now a fixed 43% debt-to-income ratio cap on conventional mortgages that cannot be exceeded. That means all of a borrowers monthly debt payments, including the mortgage, should not exceed 43% of gross monthly income. For middle class families this could have an impact on the amount they can borrow to purchase a home or to refinance.
Of course there is wisdom in keeping DTI ratios low, but in some cases it helps to have more wiggle room with DTI. The good news is there are alternatives to conventional mortgages though. The new debt-to-income ratios don’t apply to FHA or VA loans for instance. Plus there are other alternatives that can be investigated on a case by case basis.
Contact us today to learn more and see which government refinance or home purchase programs best fit your situation.