Lending Landscape - December 6, 2007

The lending landscape has once again changed. Rates dropped last week, but changes in lending guidelines will make it harder to get high loan to value loans, even with medium grade credit scores.

Mortgage rates are at a level unseen for several years -

The government-sponsored loan buyer said the rate on a 30-year fixed-rate loan fell to an average 5.96 percent for the week ended Dec. 6. That was down from 6.10 percent a week ago.

At this time last year, the 30-year fixed-rate mortgage averaged 6.11 percent. It has not been lower since the week ending Sept. 29, 2005, when it averaged 5.91 percent.

Additionally, the Federal Reserve Board meets this Tuesday for their final policy conference of the year. It is widely expected they will cut the key overnight rate. That rate only affects short term mortgage rates.

Despite the lower rates, it's going to be harder to get a loan. For prime borrowers, Fannie Mae has changed its guidelines and will tack on up to 2% to the rate for properties with less than 30% equity and for borrowers with credit scores less than 680. Of course FHA has not made such changes and still provides attractive interest rates for first time buyers and new home buyers with less than perfect credit.

A storm of controversy is brewing now that the White House has announced its plan to help struggling homeowners. The next few months will be very telling as to how the housing market is going to shake out. Along the Wasatch Front, the new homes market has slowed down, but builders are aggressively pricing their homes and sales are still happening.