About Government Refinance and Home Purchase Programs

After dipping to near record lows again in April, mortgage interest rates have jumped to levels not seen in more than a year. Borrowers who are hoping rates will dip down toward those record lows again will probably find themselves disappointed. With hints from the Federal Reserve that their aggressive treasuries and mortgage-backed securities purchase program may be tapering soon, mortgage interest rates are up about half a percentage point in the last month or so. And odds that rates will move higher going forward appear higher than the odds of rates significantly lowering again.

The good news is that rates are still very, very low from a historical perspective. Just a few years ago the average 30 year fixed mortgage was in the low to mid 6’s. This month the average 30 year fixed mortgage is still in the low to mid 4’s. The important thing for borrowers to recognize is that the longer they wait to refinance or purchase a home, the greater their risk will be of missing these historic low rates entirely.

Contact us in the sidebar right away to get an estimate on a government-backed mortgage. Rates are still very low by any historical measure but there is no telling how long these low rates will be available.

Homeowners who are looking to refinance have a bad habit is missing record lows on interest rates. Some miss the lows out of pure bad luck. But some miss them because they misunderstand the process of refinancing a mortgage. Getting to the point where you are ready to lock an interest rate often takes weeks after estimates are sent, applications are started, disclosures are sent and signed and returned, and other documents are gathered. People who watch rates daily and decide to start an application after rates have dipped often find that they are not ready to lock their rate in until weeks later anyway. A better approach is to get the refinance process started and watch rates as the file moves through the processing and underwriting queues. That way borrowers can lock for 30 days or sometimes 15 days and get even better rates. There is nothing wrong with getting your loan ready to go and then locking and closing late in the process — especially if rates are trending lower as they have been the last few days after spiking last Tuesday. The value to that approach in times like these, where rates appear to be inching lower again, is borrowers will be ready to close as soon as rates dip again (assuming they do dip again).

If you have been considering a refinance contact us in the sidebar today to get more information and/or an estimate. Rates are unpredictable but there is value in being ready to jump at the right time.

Mortgage interest rates started increasing about a month ago and have yet to stop their ascent. For folks who are currently in adjustable rate mortgages (ARM’s) and intend to continue owning their home for years to come, the time might finally be here to get into a fixed rate mortgage.

The value of ARMs

Adjustable rate mortgages got a bad rap after the housing crash. Too many borrowers got into adjustable rate mortgages without fully comprehending how much their payments might increase when the rates started adjusting. But the truth is ARM’s are a terrific tool for folks who intend to own the home for only a few years. For those owners there is no reason to pay a premium for a 30 year fixed rate when they fully intend to sell in 5-7 years.

Milking the low rates

Huge numbers of borrowers in the U.S. are currently in adjustable rate mortgages that already started adjusting. In many of these cases these borrowers discovered that when their loans started adjusting their payments dropped over the last few years as a result of the federal government compressing mortgage interest rates. For those borrowers it hasn’t made a lot of sense to refinance into a fixed rate because doing so would increase their payments.

But this jump in rates in the last month might mean those record low rates will be a thing of the past. Rates are still very low by any historical measure, but they are up 0.5-0.75% since April.

The time has come

If you are in an ARM now and intend to own your home for several more years contact us in the sidebar right away. There is no telling how much higher rates will go as the economy continues to improve. Rates are still near the all time lows so now is the time to lock in a low fixed rate.

As the US stock market breaks new record highs mortgage interest rates have been moving higher over the last several weeks as well. The more popular stocks become with investors the less popular US treasury bonds become and when investors sell treasury bonds mortgage interest rates normally begin moving higher. It comes as no surprise that mortgage interest rates are off their recent all time lows. Everyone knew those record lows could not persist forever. The good news is that for now interest rates are still near all time lows so it is not too late to refinance or purchase a home at these astonishingly low rates. Contact us in the sidebar to get more information and/or an estimate on a government backed mortgage right away. There is still time to get in on the low interest rate bonanza that so many borrowers have already taken advantage of.

The past year has been a good one for home values in the US. Values of homes across the country have finally begun increasing after going into a free fall in 2007. Increasing home values is not necessarily great news for home buyers but it is terrific news for folks who would like to refinance to a lower interest rate. Homeowners who currently have mortgage insurance (pmi) with their mortgage stand to benefit the most from rising home values. When a homeowner has at least 20% equity in their homes they can refinance into a conventional Fannie Mae or Freddie Mac mortgage with no mortgage insurance. It behooves anyone who has mortgage insurance now — including folks with FHA loans — to investigate the current value of their home and see if they can refinance and drop their PMI entirely.

Contact us in the sidebar to get more information on the current value of your home. Our counselors have several tools that help them estimate the current value of homes. In some cases values have increased enough to allow borrowers with mortgage insurance to refinance and drop that pmi. Dropping pmi and lowering interest rates can lead to big monthly savings for families.

FHA loans have many benefits. They tend to have great rates and they are often the best option for families who don’t have a lot of money to put down when purchasing a home. However FHA loans also have mortgage insurance. The FHA keeps itself funded using the mortgage insurance fees it collects from borrowers. So the question that many borrowers who have FHA loans ask is, when and how can I drop this FHA mortgage insurance? Here are some answers:

When can I drop my FHA pmi?: Within the first five years of having an FHA loan the only way to get rid of PMI is to refinance to a conventional mortgage. And that only will work if the you have built up more than 20% equity. If lack 20% equity you would still need mortgage insurance with a conventional loan. The FHA currently has a minimum 5 year term on FHA mortgage insurance regardless of how much equity is built up in that time. In markets where housing values are not increasing quickly that normally means borrowers are best off just waiting. But housing values are starting to increase quickly in some areas of the country so in some cases borrowers are building up 20% equity in just a couple of years. If you have an FHA loan now and believe you might have more that 20% equity in your home contact us in the sidebar.

Note: This five year rule applies to current FHA loans. Starting in June 2013 the FHA will be making their pmi last for the life of the loan on all new FHA refinances or purchases.

How do I get rid of my FHA pmi?: After 5 years the FHA mortgage insurance should drop off automatically IF the principal balance is down to 78% of the value the FHA has on record for the home. That last part in important. Here is an example: Lets’ say a home was purchased in 2010 for $250,000 and was appraised at about the same value at the time. The FHA will have that $250,000 value on record and the balance of the loan would have to be 22% less than that (about $195,000) for the mortgage insurance to automatically drop off after 5 years. This would be true even if the home could appraise for more today. For instance, even if that home could appraise for $325,000 today the FHA still uses the original $250,000 value when determining when to automatically drop their mortgage insurance.

Again, in areas where home values are increasing it might make sense to refinance out of the FHA loan to get rid of the PMI rather than wait the 5-10 years for it to drop off on its own. Contact us if you have an FHA loan and think you might have 20% equity in your home soon. Rates on Fannie Mae loans with no PMI are excellent right now and could be very worth your while.

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.

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.

Mortgage interest rates in the US have been moving lower the last few days thanks to troubles in a tiny Mediterranean island country.

As we have noted, the recent rally in the US stock markets caused mortgage interest rates to rise for the last month or so. That stock market rally was slowed this week on news that the tiny European country of Cyprus was in financial dire straits. The startling news was that Cyprus was planning to basically take a cut out of all the money deposited in its banks. It’s hard for us Americans to imagine the government coming in and taking a percentage of the money we have in stored in our bank accounts but that is pretty much what Cyprus was proposing. The very idea of such a move spooked investors all over the world on fears that starting down that slippery slope could eventually lead to a panic and a run on banks in Europe. So far Cyprus has not enacted that plan but the entire episode has cooled the rally in stocks and has sent many investors back into safer US treasury bonds. More people buying bonds drives yields on the 10 year T-bill lower and mortgage rate have followed. As a result, this weeks rates have been better then they were the previous few weeks.

If you have been considering refinancing to a better interest rate now is the time to investigate the various government refinance programs available. Rates are near all time lows for now but can’t stay this low forever. Contact us today by filling in the contact form to the right.

The FHA has been slowly going broke ever since the housing bubble burst in 2007. After sub-prime lending went extinct in 2007 the alternative for many borrowers and lenders was FHA loans. FHA loans became popular because they require little money down for purchases, they usually have low interest rates, and they allow for lower credit scores than conventional loans. The problem for the FHA was that housing prices continued to drop for several years after the FHA boom in 2007. Many of the loans the FHA had insured ended up defaulting and the FHA has been on the hook to pay the lenders off. That has led to a depletion of the FHA insurance funds.

To raise more money, the FHA has raised their mortgage insurance fees numerous times in the last few years. The next scheduled change will make the monthly FHA mortgage insurance fees last for the life of the loan rather than for the minimum 5 years that is in place now. This change in policy means that anyone looking to refinance their current FHA loan to the current all time low rates should get the process started in May to avoid the upcoming mortgage insurance change.

Borrowers with FHA loans should contact us today to get an estimate on an FHA streamline. Rates on 30 year fixed FHA streamlines have been in the mid to low 3’s in recent weeks. And while FHA streamlines will still exist after the coming change on June 3rd, the FHA rules are less expensive right now than they will be next month.