30 Year Fixed Rate Loan at a Cost of One Point: 4.125%*
Rates got worse Friday for no particular significant reason. According to one of our analysts, “rates cannot stay that low forever”, so they increased a bit.
A lawyer contacted us last week for a loan. He has a 40% loan-to-value, $500,000 loan; he has no consumer debt and credit scores of over 800; and he has seven-figure investment accounts. But, he also took a long vacation in 2009 and now he cannot get a loan to save his life.
There is virtually no risk of default, but Fannie and Freddie won’t touch this guy because he has almost no income in 2009. He is thriving again now, but 2009 was just too weak.
This illustrates a point we make time and again to very strong, but very frustrated borrowers. The game is no longer about proving to banks that borrowers will perform as promised and avoid default. The game is now entirely about satisfying the requirements of Fannie, Freddie and FHA, no matter how strong a borrower may be.
Our lawyer above does have a few options: (1) Audited 2010 Financials; (2) Buying a larger enough 5 year annuity to guarantee enough income to qualify; or (3) quasi-hard money at 9%. But Fannie Mae is not an option for him right now.
*The above rate quote has the following assumptions: $400,000 Loan Amount; 20% down payment; credit score above 740; property is SFR; borrower has sufficient income to qualify; APR is approximately 0.20% higher than quoted rate for a $400,000 loan. Estimated closing costs affecting the APR include $4,595 for Origination and Processing Fees, $850 for other Lender Fees; $1,400 for Escrow Fees, and $1,000 for Prepaid Interest.
Call Jay Voorhees or Heejin Kim at (925) 855-4491
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