According to Realty Times ® Freddie Mac today released the results of its Primary Mortgage Market Survey in which the 30-year fixed-mortgage rate (FMR) averaged 5.19 percent this week. This is the lowest FMR that Freddie Mac has recorded since it started keeping records in 1971 or 37 years ago. A year ago, the rate for a 30-year FMR averaged 6.14 percent.
Well that’s the good news. The bad news is in order to qualify for the above rates, according to Donna Knapp of Empire Home Loans, you need to have a FICO score of 740, full documents, that is proof of your income, the assets that you have and a review of your income tax returns. However, if you have all of that,you can get up to 100 percent financing.
The couple were then qualified for a large loan to buy a home beyond their means. With a low starter teaser interest rate, they could manage to hang on the home thinking the price of the home they purchased would go up and when the interest rate increased, they could refinance or sell. However, when the interest rate rolled over to a higher rate, they could not afford the new payment. In the meantime,the value of their home had gone down and they could not refinance. All the couple could do was move out and let the home go into foreclosure.
You may ask why banks ever made stated income loans. These type of loans were designed for self employed people, who’s income is erratic, but in general have good credit and usually are a good credit risk. So,understanding how the system was abused you can also understand how we are in such a financial mess because of the loose loans that were made in the recent past. In summary, the banks did not do due diligent on their part to assure themselves as to whom they were dealing with. Now they have gone to the other extreme, making it hard for most people to get a loan to buy a home with their stifling requirements.