Fed Rate Cut, Why Not My Rate?

The recent Fed rate cut to 4.75% is more directly related to the interest of Home Equity Lines of Credit as they are generally tied to Prime (currently 7.75%). Since Prime floats 3% above the Fed Rate there is a direct relationship between the two.

Counter-intuitive though is why the 30 conforming (Fannie and Freddie) fixed mortgage interest rate has gone up a bit since the most recent Fed rate cut. The bellwether for the conforming fixed rate is the 10 year treasury bond yield. That has been increasing as investors have been selling off bonds the last few days. The reason for the sell-off is that investors worry that the Fed rate cut might kick-start inflationary pressures.

So, despite people's wish for the opposite, the Fed rate cut has negatively impacted mortgage rates for the short term.

Dodos and Edsels

No Doc and No Ratio mortgages are becoming harder and harder to come by. Chase has eliminated both of these documentation types. These loans do not perform. That means these loans were being used to put borrowers into homes with payments they could not and do not pay. Banks don't like to loan money to people who don't pay their payments, so these mortgages are gone. No Income Verification and Stated Income / Stated Asset Alt A mortgages still exist.

Johnny Cash, Nine Inch Nails and David Bowie

Watching YouTube the other day, it dawned on me that the artists who created the videos I watched are mostly self employed. We've all been hearing about daily, hourly, minute by minute guideline changes by lenders lately, so I thought I'd chime in.

Now all No Income Verification loans are only available for the truly self employed. If you are salaried at your job, then this isn't the mortgage program for you. Also No Ratio, No Doc, and other Alt A lending programs are going to be limited to homeowners only. If you are a first time home buyer, you will probably not qualify for this programs either.

Credit score is King these days too. An excellent credit score will still enable home buyers to qualify for most of the programs out there, those will less than perfect scores should be prepared to apply for full documentation mortgages, thus limiting them to buying properties they can really afford.