About Government Refinance and Home Purchase Programs

Freddie Mac is reporting that rates on 15 year mortgages and 5 year ARM’s are hitting new all time lows this week. The previous record low rates on these two mortgage products happened last November. Rates on 30 year fixed and other mortgage types did not break new record lows but are near the all time lows this week.

15 year mortgages are not for everyone but have some major advantages for families who can afford higher monthly payments. The primary advantage of a getting 15 year mortgage, besides the obvious benefit of paying off twice as fast as a 30 year loan, is that rates on 15 year mortgage tend to be at least a half a percent better than rates on 30 year mortgages. So over the life of the loan people with a 15 year mortgage pay much less in interest. The downside to 15 year mortgages is that payments tend to be significantly higher than the same loan amount being paid off over 30 year. Here is an example:

– The principal and interest payment on a $200,000 loan over 30 years at 3.5% would be about $898/month
– The principal and interest payment on a $200,000 loan over 15 years at 2.75% would be about $1357/month

So despite the 15 year rate being 3/4 of a percent lower in the above example, the minimum monthly payment is still nearly $460 higher. For a family that could easily afford the extra $460 or so per month the 15 year mortgage makes great sense in the long run. For families that don’t have that kind of extra monthly cash, a 30 year loan probably still makes sense.

The other thing to consider is that on a 30 year fixed loan there is virtually never a prepayment penalty. So a family with a 30 year loan could always pay ahead and still knock their mortgage out in less than 30 years if they wanted. The advantage of voluntarily paying ahead every month on a 30 year loan is if there comes a time when money gets tight you can go back to the minimum payment. With 15 year mortgages that higher payment is due every month regardless of income fluctuations.

Record lows on mortgage interest rates, by definition, are very rare. Contact us in the sidebar today to get a refinance estimate for your home.

Recent shifts in the stock market have sent more and more investors back into the safety of government bonds. The increased popularity of US bonds has pushed yields on those bonds lower and mortgage interest rates have followed. The yield on the 10 year T-Note closed at about 30 basis points lower than its 2013 highs from about a month ago. That means that mortgage interest rates are about a quarter percent better now than they were in mid March. Yields on US bonds are not quite at the all time lows they hit last November but they are getting in the same ballpark again.

If you have considered refinancing contact us in the sidebar immediately. When the trends on rates are moving in the right direction it is an excellent time to start a refinance. There are several government refinance programs that are up and running now that have proven extremely helpful to millions of American homeowners already. The Obama administration has extended and enhanced some of these programs, such as the HARP program and the FHA streamline program, to make them even more beneficial to borrowers. Contact us in the form on the right to learn more.

The Home Affordable Refinance Program, or HARP program, was initially set to expire at the end of 2013. But today the government agency that oversees HARP announced the highly successful program will be extended for two more years until Dec. 31, 2015.

Ed DeMarco, the director of the Federal Housing Finance Agency (FHFA) said this about the extension of the HARP program:

“More than 2 million homeowners have refinanced through HARP, proving it a useful tool for reducing risk. We are extending the program so more underwater borrowers can benefit from the lower interest rates.”

The HARP program applies to conventional mortgages that are currently backed by Fannie Mae or Freddie Mac. There has been speculation that a “HARP 3” program might be launched at some point in order to expand that pool of candidates for the HARP program beyond the current parameters but nothing has been announced on HARP 3 yet.

This two year expansion means there is more time for a HARP 3.0 and other enhancements of the program to get off the ground though, so bookmark this site to get the latest news on the HARP and other government refinance options. Contact us in the sidebar today to learn more about all of the government refinance programs that are currently available.

Mortgage interest rates have been moving lower for over a week now. A slow but steady drumbeat of disconcerting world news, including signs of more financial troubles in Europe and increasingly aggressive actions from North Korea have sent investors all over the world back to safer investments like US Treasuries. The increased popularity of US treasuries has in a roundabout way put downward pressure on mortgage interest rates again. While rates are not yet at the all time lows we saw in last winter, they are better than the increased rates we saw for much of February and March.

One big mistake that a lot of people make when looking to refinance is waiting too long to get the process started. Many borrowers wait until they think rates have bottomed out before starting a refinance process. The problem with that is that it often takes a few weeks of working on a refinance before it makes sense for a lender to lock the rate in so many borrowers miss the lows by starting too late. The best time to start a refinance is while a downward trend in rates is starting because borrowers are less likely to miss the lows in rates. Contact us in the form on the right today to learn more about the government mortgage programs that the Obama administration has in place.

One type of government backed mortgage we haven’t talked about much here in the past is the USDA rural housing loan. These USDA loans have some terrific advantages for folks who qualify. USDA mortgages have excellent rates and are one of the very few types of loans left that allow for zero money down on purchases. The main issue with the USDA mortgages is that one has to be purchasing a home in a rural, or at least relatively rural area to qualify. However, the definition of “rural” is pretty loose and in lots of new suburban communities that used to be rural areas these USDA loans are applicable still. The other sticking point for some folks is that this USDA program has a maximum income restriction so in many cases families that make six figures per year may not qualify for a USDA rural housing loan.

Our focus here has historically been mostly on refinances so if you have a USDA rural housing loan now contact us in the sidebar for info on refinancing it to a better rate. But if you or someone you know is considering purchasing a home, contact us in the sidebar as well and leave a note in the comments section that you are interested in purchasing a home rather than refinancing. We can get you information on the USDA rural housing program and other programs available in your area.