About Government Refinance and Home Purchase Programs

The record low mortgage interest rates we have seen in the last couple of months are persisting this summer. Ongoing troubles with the European and US economies are serving to keep yields on US treasuries low and mortgage interest rates are following suit. While there has been some recent pullback among many lenders from government-backed refinance programs like the FHA streamline program and HARP 2.0, those programs are still available to borrowers, even if it is taking a bit longer than usual to complete the refinancing.

At this point rates are so astonishingly low that most American mortgage holders should be at least investigating a refinance. In many cases borrowers can get 30 year fixed mortgages in the 3’s and still break even on closing costs in less than a year. And rates on 15 year fixed mortgages are getting as low as the low 3’s or even high 2’s in some cases. Refinancing to a significantly lower interest rate can save borrowers hundreds of dollars per month and many tens of thousands of dollars over the life of the loan in most cases.

Contact us using the form to the right to learn more about the programs available and to get an estimate on a government-backed mortgage refinance.

We sometimes get asked if there are really no cost refinances out there or if that is simply marketing spin by banks. The short answer is yes, no cost refinances do exist, but they are more rare than many lenders imply with their advertising.

As the old saying goes, there is no such thing as a free lunch. In this case there is technically no such thing as a truly “no cost” refinance because either the lender has to pay for the costs of a refinance or you do. However there are cases when lenders are willing to pay for all of your closing costs on refinances so it can be no cost to you. Lenders are able to do this because on most loans they are being paid a commission or finders fee for the mortgage by their investors. So for example, if an investor is willing to pay a lender $3000 for servicing rights to your new government-backed mortgage the lender can pay $2000 of your closing costs and still not lose money on the transaction.

Most likely no-cost mortgages

– FHA streamlines for FHA loans that were closed more than three years ago. If you have an FHA loan that you got in the spring of 2009 or earlier you could qualify a real no-cost FHA streamline refinance. For people in this situation the FHA has waived virtually all of the upfront mortgage insurance fees and does not allow any other closing costs to be rolled into the new loan. This results in a refinance that really does significantly reduce interest payments and payments without costing borrowers anything. Contact us to learn more about this program if you currently have an FHA loan.

– Most other types of refinances with slightly higher interest rates. For other types of refinances the most likely way to get a no cost refinance is to get a rate that is a quarter point or more higher than than average. For instance if the average mortgage rate is 3.75% you can normally get most or all of your closing costs paid for by the lender by going with a 4.0% rate. The higher interest rate gives lenders more money to pay for costs, including both the up front out of pocket expense and the costs rolled into the loan. It doesn’t always make sense to go for higher interest rates and lower closing costs though because the longer you own the property the more valuable the lower interest rate becomes.

Out of pocket costs vs. costs rolled into the loan.

Sometimes lenders will tell you that if you bring no cash to closing that it is a “no cost” refinance. But if closing costs are rolled into your new mortgage there are still costs to you. If $5000 in closing costs get rolled into your new mortgage that means you are $5000 deeper in debt and you still have to pay that money back eventually. It is important to calculate the actual costs and the number of months it takes to break even on those costs before proceeding with a refinance. (*Contact us to be connected with authorized lenders who always help borrowers calculate break even costs.*) Normally if you plan to own the house 5+ years you should be alright with a break even point of less than 2 years on a refinance but the faster you can break even the better.

Fill in the contact form on the right to get more information on this topic or to find out which government-backed refinance programs you can qualify for. With rates at all time lows this month there may never be a better time to refinance your mortgage.

As predicted, the new FHA streamline program that launched in June created a massive stampede of FHA streamline refinances over the last month or so. But as we approach August the flood of refinance applications is slowly subsiding while interest rates on government-backed mortgages continue to drop to new all-time lows.

If you have an FHA loan contact us today to see about streamlining your mortgage to a new FHA loan in the mid to high 3’s. Likewise, if you have a conventional or VA loan fill in the contact form on the right to get a quote for a new refinances at surprisingly low interest rates. With rates at all-time lows again it is starting to make sense for more and more people to take another look at refinancing. And with the backlogs in underwriting starting to ease finally the wait times on many government-backed loans won’t be as long in the latter half of the summer as they have been in the first half.

As the European debt crisis slogs along, mortgage interest rate in the US continue to test new lows. Unfortunately the number of borrowers who are able take advantage of the record low rates seems to be shrinking. While borrowers who have equity, solid credit, and enough income can still refinance to the record low rates through authorized lenders on our list, it is becoming more difficult for borrowers who are underwater on their mortgages to refinance. Fewer and fewer lenders are participating in the main refinance programs targeted toward underwater borrowers, the FHA streamline program and the HARP program. Part of the problem is lenders are leery about adding new upside-down mortgages to their books. The launches of the new FHA streamline program and the HARP program have sent many thousands of underwater borrowers in search of refinances from these programs and as a result of the popularity of these programs many banks simply have lost their appetite for funding such loans. If the problem persists the federal government might have to come up with greater incentives for lenders to participate in these programs because the programs will not do any good if none of the authorized lenders are willing to participate.

The good news is that some authorized lenders are still participating in both programs and it is still possible to get an FHA streamline or a HARP loan… for now. But with the retreating we are seeing among most authorized banks recently there is not telling how long both programs will be available. The HARP 2 program is already available among so few lenders that in many cases where the home is significantly underwater borrowers are looking at waits of three or more months to close their HARP 2.0 loan. With any luck the FHA and Fannie/Freddie will step up to make these programs more appealing and less risky for lenders soon.

In the meantime, contact us in the sidebar today to learn more about which programs are the best fit for your family. All of the government-backed refinance programs are still available for now so getting going now while rates are testing new lows is probably a very good idea.

As we have discussed in the past, the new FHA streamline program that went live June 11 is hugely beneficial to families who have FHA loans that are more than three years old. Well the expected stampede to participate in the new program is underway and several large FHA-approved lenders have decided they need to place limits on the number of FHA loans they are refinancing and servicing. The end result of this pullback by banks is likely to be that FHA streamlines will soon have higher interest rates and will be harder to come by. If you have an FHA loan that is more than three years old contact us in the sidebar right away. From the looks of things this new program with the record low interest rates might be much harder to get in the next few days.

The much-anticipated new FHA streamline program for people who have FHA loans that were started prior to May 2009 goes live Monday June 11th. With interest rates testing all time lows this new program is a good idea for virtually every home owner who qualifies. Not only can the interest rate be lowered to somewhere between 3.75% and 4.0% right now, this new program adds nothing to the loan amount and normally allows borrowers to skip at least one mortgage payment. The other benefit of the FHA streamline program is that it doesn’t matter how underwater borrowers are on their current FHA mortgage as long as there are no 30-day late payments in the last 12 months. Add to that the fact that borrowers will also receive a refund check for the amount in their current escrow account and there is no downside at all for most qualified borrowers. Again this program only applies to people who already have FHA loans that are more than three years old. But for that segment of the population taking advantage of this new program is the proverbial “no-brainer”.

Be ready for longer than usual closing waits with this new program though. Because the new program is so beneficial to qualified borrowers millions of homeowners will be seeking these FHA streamlines this summer. Folks who get started right away should expect to close their streamline loan in July. But plan for about six weeks for the refinance process in June and July until the initial rush dies down.

If you have an FHA loan you got prior to May 2009 contact us in the sidebar right away to get an estimate on this new FHA streamline program. If not, you can still contact us to learn more about other available government-backed refinance programs.

A few weeks ago we reported that the latest flare up in the European debt crisis was causing mortgage interest rates (on both government-backed loans and conventional loans) to approach record lows. Since then the anxiety over Europe’s economy has deepened and the recent jobs report in the US was much worse than expected. Those developments have sent many global investors fleeing back to the safe haven of US treasuries. And that in turn has led to new record lows on mortgage rates in the last few days.

We are getting reports from several authorized lenders that borrowers with good credit have been getting FHA streamline loans at around 3.75% in the last week or so. Likewise borrowers with plenty of equity and good credit are getting conventional refinance loans through Fannie Mae and Freddie Mac in the high 3’s. Borrowers who are significantly underwater on their Fannie/Freddie loan and thus are participating in the HARP 2.0 program are still getting rates in the mid 4’s but that is still often saving hundreds of dollars per month.

Contact us in the sidebar right away for guidance on the best program for your situation. These record low interest rates are a temporary thing so the sooner you can get started and lock a rate in the better.

The new FHA streamline program for borrowers who currently have FHA loans more than three years old is starting in just a few weeks. As we have noted in the past, this new program is dramatically more beneficial to borrowers than the previous FHA streamline program because the upfront FHA fee will be waived and the monthly FHA mortgage insurance will no longer be doubling.

As if the launch of this new FHA program weren’t enough good news, add to that the fact that mortgage interest rates on FHA loans are testing all time lows recently. We are hearing of qualified borrowers with excellent credit locking in rates as low as 3.75% on new 30 year fixed FHA loans this week in anticipation of closing in mid June after the new program launches. (Note: rates on FHA loans are lower than rates on HARP loans right now.) If you know of anyone with an FHA mortgage that they got prior to May of 2009 — no matter how upside down/underwater it may be — have them contact us in the sidebar right away. We don’t anticipate this current dip in mortgage interest rates will last long.

With the debt crisis in Europe flaring up again, more and more investors are fleeing stocks for the safety of US treasury bonds. The more investors buy up US treasury bonds, the more mortgage interest rates tend to dip. The latest round of European debt fears has driven mortgage interest rates down to levels that are once again threatening all time lows.

As we have noted before, rates on HARP 2.0 loans tend to be somewhat higher than rates on less risky mortgages. But even at rates slightly higher than other mortgage HARP 2 loans are often great options for those who can qualify. And rates on all types of mortgages have been improving with the yield on the 10 year treasury note dipping again.

Rates on FHA loans are especially low lately — often lower than the best available rates on conventional mortgages. This is especially good news to folks who have FHA loans that are more than three years old because they should be eligible for the new FHA streamline program set to launch in June 2012. Borrowers with VA and conventional mortgages now also have plenty of reason to investigate refinancing right now.

Contact us in the sidebar today to learn more about the available programs and rates while we are still in this historic dip in rates.

We have been getting some questions on what to expect on interest rates for HARP 2.0 loans. The simple answer is that as of May 2012 rates on HARP 2 loans have reportedly been mostly in the mid to high 4’s. Here are some more details:

– If your 1st mortgage is less than 125% of the current value of the home you can get a HARP 1.0 rate. Those rates have been a bit lower than HARP 2.0 loans. HARP 1.0 rates have reportedly been mostly in the mid to low 4s this month.

– Don’t expect rates at 4% or less for a 30 year fixed HARP loan. HARP loans, while subsidized by Fannie or Freddie, are still high risk loans because they by definition are for homes with little or no equity. As a result 30 year fixed HARP loan rates are not the extremely low teaser rates banks love to advertise to lure customers in.

– Freddie HARP loans tend to have higher rates than Fannie HARP loans. Authorized lenders nearly universally report that Freddie is more difficult to work with than Fannie and thus investor demand for Freddie loans is lower than for Fannie loans. The end result is that rates on Freddie HARP loans are routinely as much a .25% higher than rates on similar Fannie HARP loans.

– Rates on non-owner-occupied HARP loans tend to be higher than rates for owner occupied properties.

– The rate and fee hits for lower credit scores are surprisingly minimal on HARP 2.0 loans. In other words people with less than optimal credit can often get the same HARP 2 rates as people with great credit scores.

We’ll post on more quirks and details of Fannie vs Freddie HARP loans soon. But in the meantime contact us in the sidebar to have us look at your specific situation. If you look like a good candidate for a HARP loan we can connect you with an authorized lender who can get you an quote on a HARP loan.

With so few banks fully participating in the HARP 2.0 program we are getting reports that the authorized lenders who are participating are beginning to experience delays in underwriting because of high demand for the program. Sources within participating banks tell us that underwriters who used to be able to complete a review of a file a few days after submission are now sometimes taking a couple of weeks to even get to files because of the volume being submitted. They expect the wait times to get longer an longer in the months to come as more borrowers become aware of the newly rolled out program.

We expect a similar underwriting traffic jam for FHA streamlines in June when the new FHA streamline program begins.

If you have a conventional loan backed by Fannie or Freddie and are interested in the HARP 2.0 program or if you have an FHA loan and are interested in the new FHA streamline program contact us in the sidebar right away to be connected with a participating authorized lender. The sooner you can start the process the better because as awareness of the program increases so will underwriting turn times.

As we have noted here recently the HARP 2.0 program is now up and running. A few authorized lenders are fully embracing the new program but most lenders/banks are either ignoring HARP 2.0 or only partially implementing it. (Contact us in the sidebar to be connected with an authorized lender that is fully implementing HARP 2.0).

As the HARP 2.0 program has gotten under way it has become evident that borrowers who currently have Fannie Mae loans have been getting appraisal waivers more often than borrowers who have Freddie Mac loans. The way the process works is the authorized bank inputs the loan details in the the Fannie or Freddie preliminary underwriting software and that software comes back with results, including preliminary approvals or denials and results on whether appraisals will be required or not. Early reports from participating lenders indicate that the Fannie Mae software has been waiving the appraisal more often than not. The Freddie Mac underwriting software has been much more likely to require an appraisal as part of the refinance process. There are rumors that the Freddie software will be getting an update and it will be easier to get an appraisal waiver with Freddie loans soon too but time will tell.

Of course in the end the appraisal is mostly an inconvenience because the HARP 2.0 program when fully implemented allows for refinances no matter how low the appraisal comes in. Still, avoiding the appraisal makes the refinance process go faster and saves borrowers a few hundreds dollars up front.

If you have an conventional loan backed by Fannie Mae or Freddie Mac (see here to check) and would like to learn more about the HARP 2.0 program or to be connected with a fully participating authorized lender/bank contact us in the sidebar.