Monrovia Home Loan Credit Decisions Are About to Change
This will be a heads-up for San Gabriel Valley residents who may be applying for a home loan in the future: there are some major adjustments underway that could affect their eligibility. It hasn’t been talked about much—possibly because most peoples’ eyes tend to glaze over when the topic of loan analysis is raised. But the more local mortgage applicants know about how lenders decide which loans to grant and on what terms, the better the odds of getting a green light. Briefly, here’s what is coming:
Starting on the 25th of this month, the way Fannie Mae (FNMA) goes about assessing creditworthiness will change. FNMA is the government-backed outfit that buys up private lenders’ home loans once they have been made. That insures that the lenders continue to have a steady supply of cash with which to fund new loans. In short, Fannie’s mission is to keep the home loan industry liquid. Together with similar corporation Freddie Mac, they are behind 60% of home loans in the U.S.—so many area mortgages are directly involved.
In order to qualify for government backing, lenders have to prove that a given home loan carries an acceptable level of risk. Lenders work with software programs issued by Fannie to help put numbers to the amount of risk—and that’s where the change is about to take place. Beginning next weekend, their latest release of the software (“Desk Underwriter 10.0”) will start to be used. For the first time, it will add a new element in the way a local applicant’s credit history is analyzed—one that is intended to better predict their ability to repay. It’s called “trended data.”
Credit reports will continue to use the familiar scoring benchmarks: outstanding balance, percentage of credit used, and timeliness of payments. In fact, the traditional credit scores aren’t slated to be impacted at all. What will change is the importance those scores are given, because the trended credit data will go deeper into what a borrower’s history shows. The software will take the previous 24 months’ revolving credit card payment history to rate whether the trend has been one of using more credit; maintaining the same level of borrowing; or paying down balances. In brief, if the “trended data” shows that balances owed have been rising, it indicates a Near Prime borrower. If the amount owed remains relatively stable, it shows a Prime borrower. If the balances have been dropping, it indicates a Super Prime candidate who is most likely to repay without a hitch.
There are nuances, too (they really would make everyone’s eyes glaze over)—but that’s the big picture. For mortgage applicants who will be applying this summer, the fact that their history will now be analyzed in this manner is at least good to know—even if it’s not possible to alter. For everyone else who may not be applying for a while yet, it should be useful to plan credit card usage in light of how it’s likely to affect lending decisions.
I make it a point to keep my clients abreast of all current developments affecting the buying, selling, and financing of San Gabriel Valley area properties. Whenever you have a question about anything to do with our local Monrovia real estate scene, I hope you won’t hesitate to call!
All Connected: Mortgage Interest Rates & Breaking News
One way or another, it’s all connected. Last week ended with what some observers justifiably called a “shocking” development—one that could impact our San Gabriel Valley’s home buyers and sellers measurably—at least in the short run. It came with the release of the employment statistics from the Department of Labor. They weren’t good numbers. But the surprisingly weak report might be good news for some home buyers, since it could well affect affordability. As I said, it’s all connected.
“Affordability” is the index that seeks to summarize in a single number whether or not a typical family would qualify for a mortgage under current economic conditions. When a homeowner in San Gabriel Valley is looking at the state of the market, it’s not a bad indicator for explaining why sales might be rising or falling. Even though the nation’s residential prices have been rising steadily, the Affordability Index has remained better than the historical average. You’d think that when something is more expensive, it would be less affordable—but the contradiction is explainable when mortgage interest rates are taken into account.
All across the U.S., very low mortgage interest rates have been more than compensating for higher home price tags. Interest rates near or below the 4% mark tend to make monthly home loan payments eminently affordable. That happy situation can’t last forever, of course; so it’s why anyone with stake in Monrovia area real estate has reason to watch for changes in mortgage interest rates. If you are thinking of buying a home in Monrovia or the surrounding towns, low mortgage interest rates are a strong motivator to get going. If you are thinking of selling, legions of motivated buyers are what you’d hope for.
Adding more fuel to the fire had been the growing likelihood that those mortgage interest rates will soon begin to rise—this month, as a matter of fact. Until last Friday, the Federal Reserve governors had been unusually forthright in statements that they were likely raise lending rates at next week’s meeting. The experts didn’t disagree.
Then came Friday’s jobs report, which blew those expectations, if not into the weeds, at least onto the sidewalk. MarketWatch was typical. “Weak job numbers…have essentially taken a June rate increase off the table.” They called the chances for such a move in July “also significantly reduced.” Only hours earlier, the same site had headlined, “Investors are now ready to accept the Fed’s interest-rate hike.”
Fortune was equally firm, headlining, “Don’t expect the Fed to Raise Interest Rates This Month.” An earlier article had described financial markets that were raising bets on a June increase following release of Fed deliberations.
Does this new twist make Monrovia real estate market more or less attractive? The poor labor report might give some pause about the U.S. economy as a whole, but the local area’s continuing low mortgage interest rates certainly counterbalance those concerns. Then there is always the outside chance that the experts are, again, wrong—and the Fed will raise the Funds rate, anyway.
There is at least one sure way to take advantage of the best that Monrovia’s real estate market has to offer—call me!
Monrovia Homes for Sale? Think Food!
It’s interesting to look into how many ways the universe of food —be it restaurants, markets, cooking, gardening or eating—intersects with the world of real estate. The connections are many and important. That’s true from the moment a future area homeowner begins to look into the current crop of local homes for sale.
We commonly think about residential real estate predominantly in terms of shelter. The listed homes for sale are vying to become the roof over our head; the place where the family will be blissfully protected from the elements. But since it will also be the place where we prepare our meals, store the groceries, and experience the holiday celebrations and feasts that will be remembered forever as key moments in our family’s life together.
Food is central to all these things—it’s why homes for sale that can claim superior kitchens have a clear advantage over those with cramped layouts or dated appliances. The popularity of formal dining rooms may be waning, but the importance of the kitchen has never been more pronounced. Interestingly, large, showy kitchens don’t always get the highest marks from experienced family head chefs. For some, a more compact layout that creates an efficient “work triangle” (the imaginary line connecting cook top, sink, and refrigerator) can win favor by saving steps—and time. In any case, most Americans think of the kitchen as the house’s nerve center around which family life revolves. And in summertime, when the action moves outside, an extra advantage goes to the homes for sale that have patios or decks that look ideal for outdoor grilling.
Wonderful outdoor eating area.
It is also true that for even the most dedicated amateur chefs, hectic workday schedules can mean that cookery of any kind is forced into becoming a strictly weekend pursuit. For those whose professional lives make that an unavoidable reality, a property’s proximity to local dining outlets, like our wonderful Monrovia Old Town, can be a major selling point. One way alert homeowners take advantage of that is by preparing a list of their favorite local eateries—or even by prominently displaying a collection of current take-out menus from nearby restaurants.
When you think about it, it makes good sense to take a look at the ways homes for sale in Monrovia or the San Gabriel Valley can make the food connection part of their marketing approach. Call me for a rundown of some of the other lifestyle elements that we can use to demonstrate to prospective buyers how readily your property can fit into their vision of what a treasured home should be.