Lending standards loosen up
It might get a little easier for some borrowers to get mortgages in the coming months. Increased competition among lenders and recent efforts by mortgage giants Fannie Mae and Freddie Mac should contribute to easier standards.
Fannie and Freddie are not direct lenders. They set the guidelines for the types of loans they are willing to buy. Many lenders have been imposing stricter requirements when issuing mortgages to avoid the risk of lawsuits from Fannie and Freddie. Recently, Fannie and Freddie provided more clarity on when lenders can be penalized for loans that go bad after they're sold. The revised rules put some lenders more at ease.
Result: More loans
"I think we may see some more potential lending to make more mortgages available to more buyers." says Jonathan Corr, president of Ellie Mae. "Right now, they can require you to repurchase the loan for pretty much anything, even small clerical errors."
Housing market stabilizes
Home prices will continue to increase in 2015, but at a slower pace than they have in recent months. That's not necessarily a bad sign for the housing market. Rather, it's the beginning of a stable market, says Phil Huff, CEO of Platinum Data Solutions.
"I think this is the beginning of the new norm," he says. "I don't expect to see pressure on prices one way or another."
Nationwide, prices are expected to rise about 4.5 percent by the end of the year, according to Realtor.com. That's a reasonable increase, and it's not like the price jumps that buyers saw in the past couple of years.
Outlook on winter sales
Still, the winter may be a great time to buy and sell a home.
"Some people feel like now is not necessarily a good time to list, but we continue to see homes move because of low inventory," says Chad Royle, regional sales manager for Bank of the West in Denver.
Mortgage rates are low -- for now
Mortgage rates have stayed low for much longer than most mortgage experts had expected. This winter may be the last chance for buyers and refinancers to grab rates at the bottom. The Mortgage Bankers Association predicts the 30-year fixed rate will reach 4.4 percent by the end of the first quarter.
That's slightly higher than where rates are now, but it's still attractive.
If you have sat on the sidelines, waiting to refinance or buy, you may be in for a surprise if you wait too long. The Federal Reserve is likely to raise the federal funds rate in 2015, and when that happens, mortgage rates will jump, says Brett Sinnott, director of secondary marketing at CMG Mortgage Group in San Ramon, California.
"The clock is ticking," Sinnott says. "Act now. The first quarter is going to be crucial in getting a loan completed."
Time to refinance HELOCs?
Many homeowners who borrowed against their equity with home equity lines of credit or other variable-rate loans might want to consider refinancing this winter. Once the Fed raises the federal funds rate, these loans may become more expensive -- and borrowers will find higher rates on fixed-rate loans, too, mortgage experts say.
"If someone has a large line (of credit) and rates start jumping, that can drastically impact the individual's ability to pay the loan," Royle says. "I would strongly encourage people to consider refinancing into a fixed term now."
Proactive, not reactive
Royle says he has seen a number of people refinancing because they have HELOCs whose draw periods are about to expire. But few people are refinancing because they are aware that rates will rise, he says.
"I think that's going to be the problem," he says. "The consumer will be in a reactionary mode. I would encourage people to be proactive and refinance now."
Lower down payments for first-time buyers
Fannie Mae has recently announced a program that allows first-time homebuyers to get a mortgage with as little as 3 percent down, instead of the usual minimum of 5 percent. The program is available through state housing finance agencies. At least one of the co-borrowers on the loan must be a first-time buyer.
Homeowners who wish to refinance, but don't have sufficient equity to refinance through other types of loans, can refinance up to 97 percent of their home's values. Buyers still have to meet Fannie's requirements to qualify for a loan but the program may be helpful to buyers who have not managed to save enough for a down payment.
"They are trying to stimulate the market," Huff says. "I think it will help some borrowers, but it's not going to have a major impact on the market."