Mortgage rates are at all time lows, but the news is even better than that for cash-strapped buyers. We have returned to having something called premium pricing. Basically, premium pricing is this: if today’s rate for an FHA loan is 4.5% with a small loan fee, (which is Awesome), but your buyer doesn’t have the money for both the 3.5% down payment and the closing costs, they can instead take a rate of say 5.0% - (which is still good), but at that rate, we are not charged any fee from the lender, instead they pay us a Premium for this loan- and this is passed on to the Buyer to pay all their closing costs.
So the Buyer only needs the 3.5% down payment to close, and that could be gifted from family.
This also works on conventional refinances – if someone wants to refi, but doesn’t want to pay any fees, or have anything added to their current principal balance on their loan, at about 5.125% they could get an absolutely no-cost refinance – because the Premium paid by Fannie Mae/Freddie Mac etc will cover all the closing costs. They would begin saving money the 1st month, instead of waiting 3-4 years to recoup their closing costs. This is especially nice if you are refinancing a rental, because Fannie Mae adds a 1.75% fee on all those loans now. But 5.25% would likely cover that and all the other costs as well.
Many of you are familiar with this information, however, for the last couple years, the rates provided very little premium, so you would have had a substantial increase in rate to get any premium for the client.
Darel Ansley
Peoples Bank
29 S. Wenatchee Ave
Wenatchee, WA 98801
darel.ansley@peoplesbank-wa.com
O 509-664-5324
C 509-860-3301
F 509-664-5315
